An investigation of the value relevance of accounting information, IFRS, institutional factors, culture, and corporate governance: International evidence

The purpose of my dissertation is to investigate whether the use of International Financial Reporting Standards (IFRS) for financial reporting is associated with incremental changes in the value relevance of accounting information and to explore whether cross-country institutional factors or corporate governance mechanisms provide incremental information to explain the firm's stock price (return). I use a price-based valuation model, which shows the association between the market value of equity and accounting earnings (book value), and a returns-based valuation model, which shows the association between returns and earnings levels (changes). In Chapter 2, I investigate whether the use of IFRS is associated with the value relevance of accounting information across sixteen countries using a price (return) sample of 888 (843) firms with 5,180 (4,684) firm-year observations. The results are mixed; in both models, the IFRS dummy is significantly informative, but the interaction terms are not. Next, I examine whether the use of IFRS for financial reporting is related to the country's legal origin, strength of its judicial system, or secrecy of its culture in Chapter 3 using the same samples. The results suggest that the use of IFRS can affect the informativeness of accounting information and that cross-country factors continue to be informative. Chapter 4 investigates whether firm-level corporate governance mechanisms across fourteen countries provide incremental information to the value relevance of the firm's accounting information when IFRS is used for financial reporting using a price (return) sample of 176 (163) firms with 610 (554) firm-years. The corporate governance measure is insignificant in the price model and shows some significance in the return model. Overall, my results confirm prior research regarding the use of IFRS and provide evidence that cross-country differences continue to provide incremental information when IFRS are used for financial reporting. Prior research has examined these factors in different combinations, but, to my knowledge, a study of incremental association of these factors with the value relevance of accounting information and the use of IFRS has not been investigated. My dissertation contributes to the literature in international accounting and offers policy, practical, and educational implications for convergence with IFRS.