The impact of IFRS on the analysts' information environment: the role of accounting policies and ...

491 Pages·2017·3.32 MB·English

Loughborough University
Institutional Repository
The impact of IFRS on the
analysts’ information
environment: the role of
accounting policies and
corporate disclosure
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by the/an author.
Additional Information:
• A Doctoral Thesis. Submitted in partial fulfilment of the requirements
for the award of Doctor of Philosophy of Loughborough University.
Metadata Record: https://dspace.lboro.ac.uk/2134/23881
Publisher: (cid:13)c Georgios Mylonas
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ative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
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Please cite the published version.
“The impact of IFRS on the analysts’ information
environment: The role of accounting policies and
corporate disclosure”

by

Georgios Mylonas

Doctoral Thesis

Submitted in partial fulfillment of the requirements

for the award of

Doctor of Philosophy of Loughborough University

July 2016

© by Georgios Mylonas 2016

1
Volume I
Contents
Table 1. Contents Page
Volume I 1 - 389
Table of Contents 2 - 6
Table of Contents: List Of Tables And Figures 6 - 13
Acknowledgements 14 - 15
Declaration Of Published Work 16
Summary 17
Chapter 1. Introduction 18 - 33
1.1. Introduction 18
1.2. The purpose and impact of IFRS 19 - 20
1.3. The analysts’ forecasts as information asymmetry proxies 20 - 22
1.4. The aim and motivation of the thesis 22
1.4.1. The development of new approach to assess the association of
23
corporate disclosure and analysts’ forecasts
1.4.2. The research questions 23 - 25
1.4.3. The empirical chapter focussing on the adoption of IFRS 26 - 27
1.4.4. The empirical chapter focussing on the post-IFRS adoption era 27 - 29
1.5. The structure of the thesis 30
1.6. The contribution of the thesis 31 - 33
Chapter 2. IFRS, Global Harmonisation and Economic Outcomes 34 - 75
2.1 The theoretical framework 35 - 38
2.2. Global financial reporting convergence 39 - 52
2.2.1. International accounting harmonisation 39 - 45
2.2.2. Fair value, relevance and reliability 45 - 48
2.2.3. Convergence and potential IFRS adoption by the United States
48 - 52
and the rest of the world
2.3. IFRS adoption: Economic effects and consequences 52 - 73
2.3.1. Comparability 52 - 56
2
Table 1. Contents (continued) Page
2.3.2. Incentives and opportunities: comparability and directors’ share
57 - 58
dealings
2.3.3. Economic outcomes: Value relevance 59 - 62
2.3.4. Economic outcomes: Cost of capital 63 - 73
2.4. The potential effect of concurrent events 73 - 74
2.5. Summary 75
Chapter 3. IFRS, Accounting Quality and Analysts’ Earnings Forecasts: An
76 - 113
Overview
3.1. Incentives and opportunities: IFRS, earnings management and accounting
77 - 87
quality
3.2. Analysts’ forecasts 87 - 101
3.2.1. IFRS adoption and analysts’ forecasts 91 - 101
3.2.2.1. Institutional factors and analysts’ forecasts properties 91 - 92
3.2.1.2. Voluntary IFRS adoption 92 - 94
3.2.1.3. Mandatory IFRS adoption 94 - 101
3.3. Intangible assets and information quality 101 - 112
3.3.1. Intangible assets: Diverse treatment and effect 102 - 107
3.3.2. IFRS and intangible assets 107 - 112
3.4. Summary 112 - 113
Chapter 4. Corporate Disclosure: Determinants and Outcomes 114 - 142
4.1. Corporate disclosure policies and analysts’ information environment 115 - 122
4.1.1. Studies using analyst disclosure index 115 - 120
4.1.2. Analysis of disclosure quality using quantitative models 120 - 122
4.2. Corporate disclosure and IFRS 123 - 133
4.2.1. IFRS disclosure evaluation using quantitative models 123 - 125
4.2.2 IFRS disclosure evaluation using manual techniques 125 - 133
4.2.2.1. IFRS, compliance and disclosure quality 125 - 128
4.2.2.2. IFRS disclosure and analysts’ forecasts 129 - 133
4.3. Corporate Disclosure: Tone analysis using manual coding 133 - 134
4.4. Corporate disclosure: Content analysis using automated techniques 134 - 142
4.4.1. Content analysis and textual tone 134 - 137
3
Table 1. Contents (continued) Page
4.4.2. Content analysis and usefulness of accounting information? 138 - 142
4.5. Summary 142
Chapter 5. Research Design and Methodology – Quantitative and Qualitative
143 - 175
analysis
5.1.The gap in the literature 143 - 145
5.2 The regulatory background in the UK, France and Germany 145 - 149
5.3. Hypotheses development 150 - 164
5.3.1. Before and after IFRS adoption 150 - 154
5.3.2. The post IFRS adoption era 154 - 164
5.3.2.1. IFRS3 Business Combinations 155 - 157
5.3.2.2. IFRS7 Financial Instruments 157 - 161
5.3.2.3. IFRS8 Operating Segments 162 - 163
5.3.2.4. Intangible assets 163 - 164
5.4. Data and sample selection 164
5.5. Research design 165 - 175
5.5.1. Measures of the analysts’ forecasts 165
5.5.2. Independent variables 165 - 167
5.5.3. Construction of the narrative disclosure measure 167 - 171
5.5.4. Accounting standards association with analysts’ information
171 - 172
environment
5.6. Multiple regression models 172 - 175
5.7. Summary 175
Chapter 6. IFRS Adoption, Corporate Disclosure and Analysts’ Information
176 - 251
Environment
6.1. Time series charts of the dependent variables 178 - 181
6.2. Time series charts of the corporate disclosure variables 181 - 183
6.3. Results 183 - 247
6.3.1. Empirical results and control variables 210 - 217
6.3.2. Empirical results and hypotheses testing 217 - 235
6.3.2.1. IFRS adoption and analysts’ forecasts 217 - 220
6.3.2.2. Goodwill intensity 220 - 224
4
Table 1. Contents (continued) Page
6.3.2.3. Goodwill impairments 225 - 227
6.3.2.4. Size of acquisitions 228 - 231
6.3.2.5. Intangible assets 231 - 235
6.3. Corporate disclosure analysis 236 - 247
6.4. Alternative tests 247 - 248
6.5. Consolidated results 249 - 250
6.6. Summary 251
Chapter 7. Accounting Standards and Disclosure Requirements: Changes in
252 - 345
the Post IFRS era and their Impact on the Analysts’ Information Environment
7.1. The adoption of IFRS3 (2008) 257 - 272
7.1.1. Hypotheses testing 268 - 272
7.2. The adoption of IFRS3 (2010) 273 - 287
7.3. The adoption of IFRS7 (2005) 288 - 305
7.4. The adoption of IFRS7 (2008) 306 - 319
7.5. The adoption of IFRS8 (2006) 320 - 336
7.6. Alternative tests 337
7.7. Consolidated results 338 - 343
7.8. Conclusion 344 - 345
Chapter 8. Conclusions 346 - 372
8.1. The Scope Of the Thesis 346
8.2.1. IFRS adoption, Corporate Disclosure and Analysts’ Information
347 - 353
Environment
8.2.2. Accounting Standards and Disclosure Requirements: Changes in
the Post IFRS era and their Impact on the Analysts’ Information 354 - 361
Environment
8.3 Contributions to the literature 361 - 363
8.4. Limitations of the research project 363 - 366
8.5. Implications, suggestions for improvements and further research 367 - 372
References 373 - 389
Volume II - Appendix 390 - 490
Table of Contents - Appendix 390
5
Table 1. Contents (continued) Page
Appendix 1. Correlation Matrix 391 - 395
Appendix 2. Winsorisation 396
Appendix 3. Beattie (2004) framework and Custom Dictionary 397 - 416
Appendix 4. Supplementary tests of Chapter 7. 417 - 477
Appendix 5. Alternative tests 478 - 490

Table 2. List of Tables and Figures Page
Table 1.1 The structure of the thesis 30
Table 3.1 Studies of analysts’ earnings forecasts 89 - 90
Figure 6.1 Monthly forecast error (Mean) 178
Figure 6.2 Monthly forecast accuracy (Mean) 179
Figure 6.3 Monthly forecast dispersion 180
Figure 6.4 Number of analyst estimations 180
Figure 6.5 UK, France and Germany 182
Figure 6.6 UK 182
Figure 6.7 France 182
Figure 6.8 Germany 183
Table 6.1 – Descriptive statistics for the whole sample 185
Table 6.2 – OLS regression results for UK companies for the whole
188 - 189
period (2003-2011)
Table 6.3 – OLS regression results for UK companies reporting under
190 - 191
UK GAAP (2003-2004)
Table 6.4 – OLS regression results for UK companies reporting under
192 - 193
IFRS (2005-2011)
Table 6.5 – OLS regression results for French companies for the
194 - 195
whole period (2003-2011)
Table 6.6 – OLS regression results for French companies reporting
196 - 197
under French GAAP (2003-2004)
Table 6.7 – OLS regression results for French companies reporting
198 - 199
under IFRS (2005-2011)
6
Table 2. List of Tables and Figures Page
Table 6.8 – OLS regression results for German companies for the
200 - 201
whole period (2003-2011)
Table 6.9 – OLS regression results for German mandatory adopters
202 - 203
for the whole period (2003-2011)
Table 6.10 – OLS regression results for German voluntary adopters
204 - 205
for the whole period (2003-2011)
Table 6.11 – OLS regression results for German mandatory adopters
206 - 207
reporting under US GAAP and German GAAP (2003-2004)
Table 6.12 – OLS regression results for German mandatory adopters
208 - 209
reporting under IFRS (2005-2011)
Table 6.13 Consolidated results for Monthly Forecast Accuracy 249
Table 6.14 Consolidated results for Monthly Forecast Dispersion 250
Table 6.15 Consolidated results for Number of Analyst Estimations 250
Table 7.1 – OLS regression results for UK companies before and
257 - 259
after IFRS3 (2008)
Table 7.2 – OLS regression results for French companies before and
260 - 261
after IFRS3 (2008)
Table 7.3 – OLS regression results for all German companies before
262 - 263
and after IFRS3 (2008)
Table 7.4 – OLS regression results for German mandatory adopters
264 - 265
before and after IFRS3 (2008)
Table 7.5 – OLS regression results for German voluntary adopters
266 - 267
before and after IFRS3 (2008)
Table 7.6 – OLS regression results for UK companies before and
273 - 275
after IFRS3 (2010)
Table 7.7 – OLS regression results for French companies before and
276 - 277
after IFRS3 (2010)
Table 7.8 – OLS regression results for all German companies before
and after IFRS3 (2010) 278 - 279

7
Table 2. List of Tables and Figures Page
Table 7.9 – OLS regression results for German mandatory adopters
280 - 281
before and after IFRS3 (2010)
Table 7.10 OLS regression results for German voluntary adopters
282 - 283
before and after IFRS3 (2010)
Table 7.11 – OLS regression results for UK companies before and
288 - 290
after IFRS7 (2005)
Table 7.12 – OLS regression results for French companies before and
291 - 292
after IFRS7 (2005)
Table 7.13 – OLS regression results for all German companies before
293 - 294
and after IFRS7 (2005)
Table 7.14 – OLS regression results for German mandatory adopters
295 - 296
before and after IFRS7 (2005)
Table 7.15 – OLS regression results for German voluntary adopters
297 - 298
before and after IFRS7 (2005)
Table 7.16 – OLS regression results for UK companies before and
306 - 308
after IFRS7 (2008)
Table 7.17 – OLS regression results for French companies before and
309 - 310
after IFRS7 (2008)
Table 7.18 – OLS regression results for all German companies before
311 - 312
and after IFRS7 (2005)
Table 7.19 – OLS regression results for German mandatory adopters
313 - 314
before and after IFRS7 (2005)
Table 7.20 – OLS regression results for German voluntary adopters
315 - 316
before and after IFRS7 (2005)
Table 7.21 – OLS regression results for UK companies before and
320 - 322
after IFRS8 (2006)
Table 7.22 – OLS regression results for French companies before and
323 - 324
after IFRS8 (2006)
Table 7.23 – OLS regression results all German companies before
and after IFRS8 (2006)
325 - 326

8
Table 2. List of Tables and Figures Page
Table 7.24 – OLS regression results for German mandatory before
327 - 328
and after IFRS8 (2006)
Table 7.25 – OLS regression results for German voluntary before and
329 - 330
after IFRS8 (2006)
Table 7.26 Consolidated results for Monthly Forecast Accuracy -
338
IFRS3
Table 7.27 Consolidated results for Monthly Forecast Accuracy -
339
IFRS7 (2005)
Table 7.28 Consolidated results for Monthly Forecast Accuracy -
339
IFRS7 (2008)
Table 7.29 Consolidated results for Monthly Forecast Accuracy -
340
IFRS8 (2006)
Table 7.30 Consolidated results for Monthly Forecast Dispersion -
341
IFRS3
Table 7.31 Consolidated results for Monthly Forecast Dispersion -
342
IFRS7 (2005)
Table 7.32 Consolidated results for Monthly Forecast Dispersion -
342
IFRS7 (2008)
Table 7.33 Consolidated results for Monthly Forecast Dispersion -
343
IFRS8 (2006)
Table A.1 – Table of Contents - Appendix 390
Table A1.1 – Correlation Matrix 391 - 395
Table A2.1 – Winsorisation 396
Table A3.1 – Beattie et al. (2004) Disclosure Framework and
397 - 401
Dictionary Reconciliation
Table A3.2 – Custom dictionary 402 - 416
Table A4.1 – Ordinary Least Squares regression results for UK
424
companies reporting before IFRS3 (2008)
Table A4.2 – Ordinary Least Squares regression results for UK
425
companies reporting under IFRS3 (2008)
9