Mandatory Adoption Research Articles

Expanded auditor’s reports and voluntary disclosure

Employing a panel sample of 5,090 firm-years from 981 UK firms during the period from 2010 to 2016, we investigate the impact of the implementation of expanded auditor’s reports (EARs) on corporate voluntary disclosure. We find that the likelihood and frequency of voluntary disclosure significantly decrease after the implementation of EARs. In addition, the total number of risks of material misstatement (RMMs) has no impact on voluntary disclosure after the implementation of EARs, while certain RMMs categories (i.e., entity rather than account risks, and firm-specific rather than industry-level risks) display a more pronounced impact on corporate voluntary disclosure. In further analysis, we find that the mandatory adoption of EARs increases the proportion of long-term forecasts, riches the content of voluntary disclosure, and elicits a more positive market response to the announcement of voluntary disclosure. Cross-sectional analyses show that the impact of the implementation of EARs on voluntary disclosure can be magnified by a higher level of media coverage, especially breaking news coverage. Our results remain valid after considering various robustness tests and selection bias concerns

Resistance and collaboration within the panoptivarsity: differing views of ORCID in Ireland

PurposeORCID is well recognised as a Persistent Identifier (PID) amongst the global academic community. The international literature is generally extremely positive towards this development. A minority of vociferous critics however have continued to dispute its benefits. Particular concerns have been noted around the potential for ORCID to be used as a tool for evaluation and surveillance by University management structures. This research sought to critically evaluate in-depth perceptions of ORCID in the Technological University (TU) sector in Ireland.Design/methodology/approachThis study involved ten semi-structured interviews with academics and five with librarians in the TU sector. Reflexive thematic analysis informed by Heideggerian hermeneutic phenomenological principles was used to explore transcribed interview data.FindingsThe results demonstrate a clear difference in perceptions concerning ORCID, with library staff being very positive and uncritical, even arguing for mandatory adoption. Although some academics were using ORCID IDs in a performative manner, most were suspicious of, or resigned to their use. Concerns about ORCID ranged across various issues including employer surveillance, a lack of institutional autonomy and its inappropriateness for the sector. It is argued that academics in the TU sector have so far not had an opportunity to fully explore and articulate their vision for the future. In its current form ORCID represents a foreign, imposed and inappropriate tool that may facilitate willing or unwilling inclusion in the inequitable and crude “game” of global university league tables.Originality/valueThe paper offers an in-depth and critical analysis of ORCID adoption in Ireland based on perceptions amongst two stakeholder groups: academics and librarians.

A Methodology for the Mechanical Design of Pneumatic Joints Using Artificial Neural Networks

The advent of collaborative and soft robotics has reduced the mandatory adoption of safety barriers, pushing human–robot interaction to previously unreachable levels. Due to their reciprocal advantages, integrating these technologies can maximize a device’s performance. However, simplifying assumptions or elementary geometries are often required due to non-linear factors that identify analytical models for designing soft pneumatic actuators for collaborative and soft robotics. Over time, various approaches have been employed to overcome these issues, including finite element analysis, response surface methodology (RSM), and machine learning (ML) algorithms. Based on the latter, in this study, the bending behavior of an externally reinforced soft pneumatic actuator was characterized by the changing geometric and functional parameters, realizing a Bend dataset. This was used to train 14 regression algorithms, and the Bilayered neural network (BNN) was the best. Three different external reinforcements, excluded for the realization of the dataset, were tested by comparing the predicted and experimental bending angles. The BNN demonstrated significantly lower error than that obtained by RSM, validating the methodology and highlighting how ML techniques can advance the prediction and mechanical design of soft pneumatic actuators.

What effect does the mandatory adoption of IFRS have on the decision to withdraw an IPO?

ABSTRACT This article fills a gap in accounting disclosure discipline and Initial Public Offerings (IPOs) withdrawal research by examining how mandating IFRS affects IPO withdrawal. This study is the first to examine more than 33,000 worldwide IPOs that were either unsuccessful or successful from 1995 to 2019 in a variety of countries with varying legislative, cultural, and economic environments. We discovered solid evidence that International Financial Reporting Standards (IFRS) standards reduced IPO withdrawal rates. Mandating IFRS before an IPO reduces information asymmetry and reduces the risk of IPO withdrawal for IPO founders. This suggests that mandatory IFRS adoption reduces IPO withdrawals due to many variables. Reduced IPO information asymmetry improves transparency, investor trust, market efficiency, comparability, and liquidity, outweighing any drawbacks. New firms, investors, scholars, and legislators could capitalize on the results of our research.

Fair value and investment property in accounting literature: a review

Purpose This study aims to provide a timely review concerning the determinants and economic consequences of fair value reporting in real estate industry, as these topics have been gaining momentum in accounting literature recently. Design/methodology/approach Diverse editorial sources (e.g. Elsevier, Emerald, Meridian Allenpress, Springer, Sage, Taylor & Francis and Wiley-Blackwell) were consulted to identify relevant studies for this review. Keywords used to collect studies include “fair value” and “IAS 40” or “investment property” and “fair value or “fair value and real estate.” This search yields 33 studies published between 2009 and 2023. Findings The synthesis of reviewed papers suggests that studies were mainly conducted in the European countries after the mandatory adoption of international financial reporting standards (IFRS) in 2005 and the Australian setting. The first stream of research deals with the choice of fair value approach. Reported empirical findings suggest that corporate size and market-to-book ratio are negatively associated with fair value choice, whereas ownership dispersion increases the likelihood of choosing fair value approach. The empirical evidence concerning the determinants of fair value magnitude suggests the type of appraiser represents a key predictor of the extent of fair value use. The second stream of research examines the impact of fair value reporting in real estate industry. Findings suggest that empirical evidence is still limited with respect to creditors, managers and financial analysts; fair value reporting is generally associated with higher level of value relevance for investors; and the use of Level 3 inputs in fair value estimates for investment properties is associated with high degree of estimation uncertainty for external auditors leading to increased audit risk and fees. Practical implications With respect to regulators, this review emphasizes that the beneficial impacts of fair value reporting are linked to institutional characteristics (e.g. legal system, the degree of market development), the reliability concerns regarding fair value estimates and the independence of appraiser. Because real estate industry is generally characterized by the lack of active market, regulators may adopt regulations requiring the independence external appraiser. Originality/value This literature review represents a historical record and an introduction for accounting scholars, in emerging economies and other settings, where fair value accounting has gained wide acceptance among the investment community. It also offers guidance for future research avenues.

Analisis Implementasi Kurikulum Merdeka pada Satuan Pendidikan Anak Usia Dini

This research addresses the importance of implementing an independent curriculum, especially considering its mandatory adoption in all educational units by 2024. The study aims to elucidate the concept of an independent curriculum at Pertiwi Gondangan Kindergarten. Utilizing a literature study approach with observation and interview techniques, including an analysis of several articles related to the implementation of the independent curriculum, the research found that a thorough understanding of curriculum concepts and structures is crucial. The primary concept in Pertiwi Gondangan Kindergarten's independent curriculum is the formation of a Pancasila student profile, featuring flexible learning and assessment processes. Assessment results are used by teachers to plan play activities and by parents to encourage children's play habits, reinforcing the role of parents as partners in the home. The structure of learning activities in the independent early childhood education curriculum comprises three integrated elements of learning outcomes within engaging activities. These outcomes in early childhood education include religious and moral values, character, identity, foundational literacy and numeracy, as well as science, technology, engineering, and art.

Impact of Cost of Capital on European Economic Growth: The Role of IFRS Mandatory Adoption

Since 2005, the International Financial Reporting Standards (IFRS) mandatory adoption in the European Union has played a pivotal role to reduce financing costs which has influenced positively economic growth across member states. Thus, this study examines the effect of Cost of Capital on Economic Growth under IFRS mandatory adoption in 17 European countries between 1994 and 2021 using Pooled Mean Group Autoregressive Distributed Lag (PMG-ARDL) and System Generalized Method of Moments (GMM-system) methods. The findings reveal a positive correlation between the Cost of Capital and Economic Growth under IFRS adoption. Specifically, the model estimates indicate that the Cost of Capital contributes to a 0.58% increase in Economic Growth in the PMG-ARDL framework. Moreover, the GMM-system model underscores the significance of IFRS adoption in reducing the Cost of Capital, leading to a 0.52% increase in Economic Growth. These results provide insights into the benefits of adopting international accounting standards and highlight the importance of institutional and financial factors in shaping the economic impact of adopting accounting standards.

Say on Pay Laws and Insider Trading

ABSTRACT We examine whether mandatory adoption of say on pay increases executives’ incentives to engage in insider trading to compensate for the negative impact of say on pay on the value of their explicit compensation packages. Our empirical design exploits the staggered adoption of say on pay laws across 14 countries over the 2000–2015 period. We find that mandatory adoption is associated with a material increase in insider trading profits, especially in firms where executive pay is most affected. The increase in insider trading profits is driven mostly by more frequent and larger profitable insider sales, consistent with executives’ desire to reduce their greater exposure to firm-specific risk while increasing their trading profits. Overall, our results highlight the importance of considering potential effects on insider trading incentives when designing compensation reforms and when assessing their effectiveness. Data Availability: All data used in the paper are available from cited public sources. JEL Classifications: G30; G34; G38; J33; K22; M12; M16.

Reporting lag in the GCC region: exploring the nexus of earnings management and IFRS transition

PurposeThe purpose of this study is to delve into the complex interplay between earnings management (EM), the International Financial Reporting Standards (IFRS) implementation and the reporting lag (RL) within the specific context of the Gulf Cooperation Council (GCC) region, with a particular emphasis on the Saudi context, offering insights into their influence on financial reporting practices.Design/methodology/approachUsing a panel data set of 135 Saudi companies over an eight-year period, covering four years before and after the mandatory adoption of IFRS in 2017, this study investigates the Saudi financial reporting landscape. It uses interaction moderation analysis to explore variable effects and includes robustness analyses to validate the findings.FindingsThe findings reveal three key outcomes. First, they challenge conventional expectations by showing no significant impact of discretionary accruals (DACC) on RL, contrary to established accounting theories. This deviation is attributed to unique market characteristics within the GCC region, including family-owned businesses, government involvement and distinct regulations, with specific insights relevant to Saudi Arabia. Second, an unexpected positive association between IFRS adoption and RL in Saudi Arabia emerged. Several contextual factors contribute, including transition costs, compliance expenses, institutional dynamics and reconciling IFRS with local Shariah principles. Most importantly, IFRS adoption significantly reduced RL, especially for companies with high DACC levels. This highlights IFRS’s transformative role, emphasizes aligning EM with international standards for investor confidence and mitigating nonconformity risks in the GCC region’s business landscape.Practical implicationsThe research findings carry significant practical implications for companies operating within the GCC region, accentuating the strategic imperative of timely financial reporting to bolster credibility, align with international standards and fortify investor confidence. Moreover, regulators and policymakers are urged to consider tailoring accounting regulations to accommodate the distinctive GCC context, thereby adeptly addressing the intricacies stemming from the interplay of EM, IFRS adoption and RL dynamics in the region.Originality/valueThis study adds to the current body of literature by highlighting the significant moderating influence of IFRS transition on the nexus between DACC and RL. It underscores the crucial role of this global accounting framework in reshaping financial reporting practices.

Corporate social responsibility disclosure and cash holdings

Purpose: the demand for firms to disclose their corporate social responsibility (CSR) activities has risen steeply over the last two decades, pushing many jurisdic-tions to implement mandatory non-financial reporting. We exploit the European non-financial reporting directive (NFRD) to study how companies change their cash management policies in response to additional mandatory CSR disclosure requirements. Methodology: we adopted a difference-in-differences (DID) approach, which is designed to estimate causality between the mandatory adoption of the NFRD and firms' cash holdings. We implemented a two-way fixed effect model in the context of mandatory disclosure and staggered adoption of regulation, in order to study how firms changed their cash holdings following the introduction of the NFRD. Findings: we find that firms increased cash holdings following enactment of the NFRD, which is in line with the theory that cash is held for precautionary reasons. The growth in cash holdings is not equally distributed, as it is less pronounced in firms that are in a high-investment phase. Our findings reveal that mandatory non-financial disclosure can have real effects. Originality/value: This research shows that, in the short-term, mandatory CSR disclosure can have real effects on cash holding. Long-term effects should be con-sidered further by future research. Practical implications (optional): Policymakers should consider that additional CSR requirements are costly to firms, and thus find mechanisms that induce firms to adopt these requirements despite their costs

Integrated Reporting and the Informativeness of Financial Analysts’ Stock Recommendations

Synopsis The research problem The purpose of this study was to examine the market reaction to sell-side analyst recommendation revisions issued under an integrated reporting (IR) approach. Motivation Advocates of this corporate reporting approach argue that IR enhances capital markets’ information environment by rendering investors better able to assess the value creation process of a firm. Recent empirical studies corroborate this argument. Considering the central role of financial intermediaries, we investigated whether the informativeness of analyst recommendation revisions is associated with the adoption of IR and the quality of integrated reports. The test hypotheses We tested whether the informativeness of analyst recommendation revisions decreases or increases after the mandatory adoption of an IR approach. Furthermore, we tested whether the informativeness is negatively or positively related to the quality of the released integrated report after the mandatory adoption of an IR approach. Target population We focused on the South African capital market, which is the only setting where IR is mandated. We utilized a sample of 3,201 recommendation revisions made within a 3-year window around the mandatory IR adoption. Adopted methodology This study used ordinary least square (OLS) regressions and applied difference-in-differences as well as instrumental variable approaches. Analyses We modeled the market reaction to the recommendation revisions as a function of the period in which the recommendations are announced (i.e., pre- or post-adoption), along with other factors affecting market reaction. In subsequent tests, we also modeled the market reaction to the recommendation revisions as a function of the quality of a firm’s integrated report. Findings We found strong evidence that analysts’ revisions exhibited economically and statistically significantly lower information content under IR. Moreover, we found that upgrades and downgrades issued in the post-adoption period were less informative when issued for firms with high-quality integrated reports. Overall, results showed that the benefit of acquiring advice from analysts became more marginal under an IR approach.

International trade, mandatory IFRS adoption and financial reporting quality

Purpose This study examines how bilateral international trade among mandatory International Financial Reporting Standards (IFRS) adopter countries moderates the relation between IFRS adoption and firms’ financial reporting quality. Design/methodology/approach The authors use data from 2007 to 2015 and focus on publicly listed firms from non-European Union countries that adopted IFRS on a mandatory basis. Findings The authors find that the interaction between mandatory IFRS adoption and a country’s bilateral trade with other countries using IFRS is negatively and significantly related to accruals-based earnings management, which is an inverse measure of financial reporting quality. This result is driven by firms in less developed countries. The improvement in accounting quality is for firms located in countries that both fully and partially adopt IFRS. The authors also find a significant and negative coefficient for the relation between real earnings management and the interaction between mandatory IFRS adoption and a country’s bilateral trade with other IFRS countries in the post-global financial crisis period. Originality/value Overall, the authors’ results are consistent with the notion that the mandatory adoption of IFRS creates a positive externality where firms improve their accounting quality because increased financial statement comparability means that foreign customers and suppliers can monitor the quality of earnings more easily.

Does mandatory IFRS adoption improve risk disclosure quality? Evidence from the European insurance industry

Purpose This study aims to investigate the effect of mandatory international financial reporting standards (IFRS) adoption on the risk disclosure quality by listed European insurers. Design/methodology/approach The study used a content analysis of the annual reports and consolidated accounts of 13 insurance companies listed in the European market between 2002 and 2007 based on two regulatory frameworks, Solvency and IFRS. Findings The results showed a significant effect of the mandatory adoption of IFRS and a clear improvement in the quality of risk disclosure. Moreover, risk disclosure is positively associated with the size of the company. Research limitations/implications The authors can consider the relatively limited size of the sample as a limitation of this study. Moreover, the manual content analysis used to be considered subjective. Practical implications The findings of this study provide useful insights to professional and regulatory bodies about the consequences of IFRS adoption to enhance transparency and particularly risk disclosure. Originality/value The research contributes to the existing literature. First, the authors have shown that companies are improving in the quality of risk disclosure even before 2005. Second, the authors have shown that the year 2005 is distinguished by a marked improvement in disclosure trends, with companies aligning themselves with coercive and mimetic regulatory forces. Third, the authors highlight the significant effect of mandatory IFRS adoption even in highly regulated industries, such as the insurance industry.

The Effect of Mandatory Adoption Pressures of International Financial Reporting Standards (IFRS/IAS) on Irregular Auditing Practices

The Effect of Mandatory Adoption Pressures of International Financial Reporting Standards (IFRS/IAS) on Irregular Auditing Practices

The Impact of IFRS Mandatory Adoption on the Performance of Saudi Banks

The study aims to determine the impact of IFRS mandatory application on financial and market performance, in the Saudi Arabian banking sector for the period from 2012 to 2021. The results of this study show that there is no relationship between the IFRS mandatory application and each of the rates, return on equity, and return on assets, while there is an inverse relationship with earnings per share. In terms of the effect on the market performance, the study concluded that there is no relationship between the IFRS mandatory application and each of the volume and value of trading, and there is a positive relationship on the growth rate. The study attributed these results to several reasons, the most important of which is the gradual application of the IFRS, which was followed by Saudi Arabia, in accordance with strict executive procedures from the Saudi Arabian Monetary Authority (SAMA).

Financial statement comparability and analysts’ optimism for accruals

This study examines the role of financial statement comparability in mitigating analysts' optimism for accruals. Prior research shows that sell-side analysts do not fully incorporate accrual information in anticipating future earnings and thus tend to issue more optimistic forecasts for firms with a higher level of accruals. We posit that financial statement comparability allows analysts to use industry peers' information in assessing the persistence of accruals, thereby lowering their optimism for accruals. We find that analysts' accrual-related optimism is significantly moderated for firms with a high degree of financial statement comparability. Further, we disaggregate financial statement comparability into accrual comparability and cash flow comparability and find that the inverse relation between comparability and analysts' optimism for accruals is driven by accrual comparability rather than cash flow comparability. Moreover, exploiting the mandatory adoption of IFRS as an exogenous increase in comparability, we find that analysts’ optimism for accruals decreases significantly following the IFRS adoption while it does not show a significant change in non-IFRS-adopting countries during the same period. Collectively, the results suggest that financial statement comparability helps analysts process and interpret accrual information, thereby improving their forecasting activities.

Mandatory adoption of technology: Can UTAUT2 model capture managers behavioral intention?

In Bangladeshi ready-made garment (RMG) and textile sectors, technology-driven compliance standards are primarily imported directly from foreign buyers' corporate social responsibility (CSR) where managers do not have enough scope of involvement, engagement, or active authority. They neither have selection freedom nor adoption willingness. The aim of this exploratory research is to understand managers' perceptions around accepting these imposed technology-driven compliance standards in the name of safety through an empirical study of the RMG sector in Bangladesh. We have used the extended framework of the unified theory of acceptance and use of technology (UTAUT2) model with certain modifications. After analyzing data through structural equation modeling (SEM), a modified theoretical framework was revealed to capture managers' behavioral intention toward a complex technological system that does not automatically arise from self-willingness; rather it is mandatory acceptance. Based on this knowledge, we recommend that the UTAUT2 model be extended and revised to capture this kind of mandatory adoption of technology. The findings of this research can provide deep and effective knowledge and experience to international buyers in the RMG sector, global supply chain members, RMG factory owners, and government policymakers.

Impact of Ind-AS on IPO Underpricing in India

The present study analyses the collaborative endeavours associated with the evolving modifications in the procedures and regulations governing initial public offering (IPO) processes in India. Partly spurred by the mandated adoption of the Ind-AS (Indian Accounting Standards), which are aligned with International Financial Reporting Standards (IFRS), the study employs a student’s t-test along with multivariate regression on 126 firms listed in India between April 2013 to March 2020 on both BSE and NSE to examine the impact of changes in accounting standards on IPO under-pricing in India. The study finds substantial evidence that transitioning from AS (erstwhile accounting standards based on Generally Accepted Accounting Principles-GAAP) to Ind-AS improved market efficiency and reduced under-pricing. The adoption of Ind-AS also demonstrates a significant impact on the investing community’s investing perception. Further, the study finds that the mean under-pricing was not affected for firms supported by venture capital and group affiliation. The study concludes that regulatory bodies should prioritise enhancing transparency in offer documents to mitigate information asymmetry. This study is a pioneering effort in examining the Indian stock market, serving as foundational research that may be used in future investigations.

Assessing the Impact of International Financial Reporting Standards (IFRS) through Bibliometric Research

The present study evaluates the influence of International Financial Reporting Standards (IFRS) on scholarly literature through the utilization of bibliometric analysis. This study examines the frequency of occurrence of terms in a dataset consisting of renowned publications, thereby uncovering significant themes and areas of focus in IFRS research. Prominent terminology such as "Financial Reporting Standard," "Reporting," and "Accounting" indicate an exhaustive examination of the practical implementation of reporting standards and accounting principles. Underappreciated terminologies such as "Mandatory Adoption" and "Earnings Management" underscore intricate domains of inquiry, addressing the complexities and ramifications linked to the implementation of IFRS. The analysis reveals overarching themes such as sustained exploration, strategic considerations, and practical application, which offer valuable insights for both researchers and practitioners. The research contributes to the delineation of research priorities, the provision of instructional materials, the orientation of policy deliberations, and the resolution of pragmatic obstacles within the ever-evolving domain of IFRS research.

Harmonized Accounting Standards and Investment Beauty Contests

ABSTRACT We study the economic impacts of adopting harmonized accounting standards when firms’ investments exhibit beauty contest features. We model harmonized accounting standards as common/correlated noises in firms’ accounting reports. We show that while more harmonized accounting standards have ambiguous effects on the reports’ informativeness in representing firms’ underlying fundamentals, they always reduce their usefulness in forecasting aggregate investments. Therefore, the stronger the beauty contest features, the more important the forecasts about the aggregate investment, thus calling for less harmonized accounting standards. We also find that, absent beauty contest features, mandatory adoption of harmonized accounting standards can be unnecessary; however, such a mandate is warranted when beauty contest features are strong as firms, when left on their own, would not voluntarily do so. Taken together, our results provide both a justification for and identification of an unintended consequence of the recent mandates toward adopting harmonized accounting standards. JEL Classifications: M41; M48.