Essays on the Informational Benefits of Accounting Standards for Listed Firms
by Sebastian Kaumanns
Date of Examination:2017-09-13
Date of issue:2017-10-13
Advisor:Prof. Dr. Jörg-Markus Hitz
Referee:Prof. Dr. Andreas Oestreicher
Referee:Prof. Dr. Maik Hammerschmidt
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Abstract
English
Based on three empirical studies, this thesis investigates informational benefits of recent financial accounting regulation for listed firms. From a broad market perspective, the thesis adds to prior research on the informational benefits of the adoption of a complete set of accounting standards, specifically, the mandatory IFRS adoption in 32 economies. It does so by studying the role of selection effects in affected financial markets (Study 1). The findings indicate systematic opt outs of firms out of newly introduced IFRS and accounting enforcement regimes. The findings further show that these systematic changes in the markets’ compositions can explain positive liquidity effects in the markets following the financial accounting regulation changes. Narrowing the research focus to informational benefits of a single accounting rule, the thesis augments the research on the fair value option as recently introduced in financial accounting regulation. Specifically, it investigates under which circumstances an offspring of the fair value option, the controversial debt value adjustments due to a change in own credit risk (DVAs), provide informational benefits for listed firms (Study 2). The results show that DVAs only provide value relevant information if the DVA-reporting firms have relatively transparent assets sides of the balance sheet, i.e., if the firms measure larger proportions of assets at reliable fair values. Finally, the thesis further enhances our understanding of informational benefits of the fair value option by providing comprehensive descriptive evidence on DVAs’ reporting by managers and the financial press (Study 3). The findings imply that managers provide more information on negative, income-reducing DVAs relative to positive DVAs, in line with claims from DVAs’ critics. The results further show that the financial press, in turn, reports positive DVAs more thoroughly, thereby possibly forming a counterweight to managers’ reporting behavior. Overall, the thesis contributes to the topical literature on accounting regulation by showing (1) a previously unknown channel through which recent accounting regulation provides informational benefits; (2) conditions for recent accounting regulation to provide informational benefits; and (3) leeway for managers for the reporting of recent accounting regulation that potentially weakens its informational benefits for listed firms.
Keywords: Mandatory IFRS Adoption; Fair Value Option; Debt Value Adjustments