The International Financial Reporting Standards 9 financial instruments, information quality and stock returns in the modern technology era
Journal of Applied Accounting Research
ISSN: 0967-5426
Article publication date: 26 January 2021
Issue publication date: 7 May 2021
Abstract
Purpose
This paper investigates the relationship between information quality and stock returns during the International Financial Reporting Standards (IFRS 9) pre-adoption announcements and examines the influence of modern technology on these relationships across 24 emerging countries.
Design/methodology/approach
This paper conducts an event study using data obtained from the DataStream, Osiris, International Telecommunication Union (ITU) and the World Bank databases from 2009 to 2014. The non-linear generalized additive model (GAM) was implemented to test the study hypotheses.
Findings
Results indicate a significant positive non-linear relationship between low information quality and stock returns during IFRS 9 pre-adoption announcements. This result implies that IFRS 9 announcements have a positive impact on corporations with low pre-adoption quality information. This result is also more pronounced in small rather than large corporations and financial rather than nonfinancial institutions. Furthermore, modern technology plays a significant decisive antecedent role, while industry type has a moderating effect on the relationship between information quality and stock returns. The codified legal system has a positive impact on stock returns across emerging countries.
Research limitations/implications
Data unavailability in some emerging countries.
Practical implications
The empirical evidence provides useful guidelines for corporate managers, investors, international accounting standard-setters and regulators to improve financial reporting practices.
Originality/value
This paper extends the work of Armstrong et al. (2010); Onali et al. (2017) by including the impact of non-linear relationships using GAM analysis and the role of modern technology across emerging countries.
Keywords
Citation
ElKelish, W.W. (2021), "The International Financial Reporting Standards 9 financial instruments, information quality and stock returns in the modern technology era", Journal of Applied Accounting Research, Vol. 22 No. 3, pp. 465-483. https://doi.org/10.1108/JAAR-12-2019-0164
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited