The purpose of this paper is to examine the relative value relevance of accounting information arising from the adoption of converged and revised International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) in East Africa.
The research applies “same firm year” design for identification of the effects of changes in accounting standards. A model similar to Ohlson’s price model and random-effects GLS are used to estimate R2 of the regressions of share prices on book values and earnings.
The results show that accounting information prepared from revised and converged IAS/IFRS display higher value relevance and also increased following the revision and convergence of IAS/IFRS. The cross-product term is more significant in the post-revision/convergence period thus providing further evidence for increased value relevance after the revision of IAS/IFRS. The results are robust to various models and show that value relevance in East Africa is relatively lower than that of the developed markets.
The current study provides empirical evidence that value relevance increases with converged/revised IAS/IFRS based on quasi natural experimental setting in East Africa. The authors also extend the debate on whether value relevance is relevant in emerging markets, which are regarded as imperfect markets with few regulations, weak enforcement and limited sources of information. The results may be useful to accounting preparers, regulators, investors, standard setters and countries seeking to adopt IAS/IFRS in developing countries.
The authors wish to thank the participants of the 5th African Accounting and Finance Association conference at the University of Mauritius for their helpful comments on the various sections of the paper. The authors also thank Professor Elmar Venter of the University of Pretoria for the special attention he gave the paper. The authors appreciate insightful comments and suggestions from two anonymous reviewers.
Outa, E.R., Ozili, P. and Eisenberg, P. (2017), "IFRS convergence and revisions: value relevance of accounting information from East Africa", Journal of Accounting in Emerging Economies, Vol. 7 No. 3, pp. 352-368. https://doi.org/10.1108/JAEE-11-2014-0062Download as .RIS
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