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1 – 10 of over 3000This study aims to examine the economic consequences of the adoption of International Financial Reporting Standards (IFRS) in Saudi Arabia. More specifically, the study examines…
Abstract
Purpose
This study aims to examine the economic consequences of the adoption of International Financial Reporting Standards (IFRS) in Saudi Arabia. More specifically, the study examines the impact of the mandatory adoption of IFRS on the accounting-based performance measures.
Design/methodology/approach
Data on study variables were obtained manually from the published financial statements of 67 of listed companies in the Saudi stock market during the period 2014–2019. The study addressed the research hypotheses by comparing the accounting-based performance measures computed under the Saudi accounting standards for three years (2014–2016) before the mandatory adoption of IFRS and the corresponding three years (2017–2019) after the mandatory adoption of IFRS. The Mann–Whitney U Test was used to investigate the significance of differences between the values of performance measures in the pre- and post-mandatory adoption periods.
Findings
The findings of the study revealed that there were no significant differences between the values of accounting-based performance measures related to the three performance categories (i.e. profitability, liquidity and leverage) in the post-mandatory adoption period (IFRS) compared to the values of these measures in the pre-mandatory adoption period (Saudi accounting standards).
Research limitations/implications
The results of the study indicated that there is a good convergence between the Saudi accounting standards that were implemented before 2017 and the IFRS that began to be applied starting from 2017. This convergence resulted in a low significant impact of IFRS on the financial statements of companies and then on the accounting-based performance measures calculated from them. However, this study suffers from some limitations, the most important of which is the small sample size as a result of the small number of listed companies in the Saudi market during the study period.
Originality/value
Although the impact of the adoption of IFRS have always been a subject of intense research in developed countries, the study of the impact of the adoption of IFRS in developing countries still limited. This study contributes to the literature by examining the economic consequences of adopting IFRS in Saudi Arabia as one of developing countries.
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Zeyneb Hafsa Orhan and Murat Isiker
This paper aims to develop a ranking methodology for the companies included in the Islamic indices in Turkey. Thus, this paper simplifies the decision-making process for investors…
Abstract
Purpose
This paper aims to develop a ranking methodology for the companies included in the Islamic indices in Turkey. Thus, this paper simplifies the decision-making process for investors with Islamic sensitivities to stock market investment when constructing their investment portfolio.
Design/methodology/approach
This paper uses a case study of 20 companies listed on Borsa Istanbul, drawing data from their 2017, 2018 and 2019 financial reports. These companies are scored and ranked according to their compatibility with the screening criteria used by Ziraat Katilim index in Turkey. In addition, this paper uses the quantitative screening process to calculate the ranking scores of these companies.
Findings
The findings show that some companies are highly compatible with the screening criteria, with ranking scores close to 100 points. However, some companies satisfied the criteria on the margin. This may not be a desirable result for some investors.
Research limitations/implications
Only 20 companies are included in the analysis. Since the conventional accounting system is used in Turkey, it was difficult to get exact information about the companies’ Sharīʿah compatibility from the financial results.
Practical implications
The findings assist investors to determine which company is ethically more responsible than others within the Islamic framework. There are also implications for the companies in question, index providers and Sharīʿah scholars.
Social implications
The findings aim to simplify the decision-making process of investors who have Islamic sensitivities to stock exchange market investment when they constitute their portfolio.
Originality/value
To the best of the authors’ knowledge, it is one of the first attempts to develop a ranking methodology for Sharīʿah-screened stocks in Turkey even though Sharīʿah screening has been on the agenda since the late 1990s. This paper also compares 11 indices based on their screening criteria.
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This study aims to quantify the cost of rebalancing Sharīʿah-compliant indexes, both economically and statistically.
Abstract
Purpose
This study aims to quantify the cost of rebalancing Sharīʿah-compliant indexes, both economically and statistically.
Design/methodology/approach
An empirical approach is employed where the rebalanced Sharīʿah-compliant index is calculated numerous times with different lags in rebalancing, and the number of stocks and their cost across time are determined in order to identify the optimal rebalancing frequency.
Findings
This paper finds that annual Sharīʿah rebalancing does not lead to significant differences in portfolio returns, even though it does bring some advantages in cumulative wealth starting from the third year onwards and brings about better risk-return characteristics measured in terms of the Sharpe ratio. However, these advantages involve an average annual shifting between 30 and 60% of the portfolio market capitalization, which would be costly at any level of transaction costs.
Practical implications
A private investor may be better off holding a constant portfolio and only rebalancing in three-year intervals since this was shown to possess similar portfolio returns and cumulative wealth results. Any advantages of annual rebalancing in terms of risk-return characteristics may be offset by transaction costs of rebalancing. Sharīʿah scholars and practitioners are to determine when the correct time for rebalancing really is, taking into consideration the cost of rebalancing vis-à-vis the advantages in cumulative wealth and risk-return characteristics of the portfolio.
Originality/value
Predictions that Islamic indexes will perform well during financial crises, such as the COVID-19 pandemic, miss the cost of frequent rebalancing. This paper addresses this issue in an empirical manner learning from the previous crisis in 2008.
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Malika Neifar and Leila Gharbi
This paper aims to determine whether Islamic banks (IBs) and conventional banks (CBs) in Tunisia are distinguishable from one another based on financial characteristics during the…
Abstract
Purpose
This paper aims to determine whether Islamic banks (IBs) and conventional banks (CBs) in Tunisia are distinguishable from one another based on financial characteristics during the 2005–2014 period covering the 2008 global financial crisis (GFC) and the 2011 Tunisian revolution.
Design/methodology/approach
For the comparison between IBs and CBs, 11 hypotheses are formulated to distinguish between the two types of banks. The authors use a univariate analysis based on the multi-dimension figures investigation and a multivariate one based on the robust OLS technique for panel linear regression with mixed effects.
Findings
Bank-specific factors, dummy and dummy interacting variables indicate that there are differences between Islamic and conventional bank behavior. Both methods show that IBs are more liquid, more profitable and riskier than CBs. Post-2011 Tunisian revolution, small IBs (small CBs) are more (less) solvent, large IBs are more stable and both types of banks are more liquid, which explain why Tunisian governments have relay on bank system to cover budget deficits post-2011 revolution.
Originality/value
In investigating the feature of IBs and CBs from the Tunisian context, the authors take into account the effect of two abnormal events (2008 GFC and 2011 Tunisian revolution) on IBs through interaction variables.
Mohammad Mohammadi, Behzad Kardan and Mahdi Salehi
The purpose of this paper is to investigate the relationship between cash holdings, investment opportunities and financial constraint with audit fees in Iran.
Abstract
Purpose
The purpose of this paper is to investigate the relationship between cash holdings, investment opportunities and financial constraint with audit fees in Iran.
Design/methodology/approach
In order to collect data, all manufacturing companies listed on the Tehran Stock Exchange are used to test the hypotheses during 2008–2015. Panel data and combined data regression model were used for data analysis. Tests were performed using R statistical software.
Findings
The results obtained from the statistical analysis of research hypotheses indicated that there is a significant relationship between cash holdings and audit fees. Furthermore, the relationship between cash holdings, financial constraints and audit fees was significant. In addition, there was no significant relationship between cash holdings, investment opportunities and audit fees.
Originality/value
The current study employed a unique topic in terms of a developing country, and the results may give strength to other developing nations.
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Sudarshan Maity and Tarak Nath Sahu
Access to finance, especially by the poor and marginalized section of the population, is a prerequisite for creating employment opportunities, economic growth, poverty reduction…
Abstract
Purpose
Access to finance, especially by the poor and marginalized section of the population, is a prerequisite for creating employment opportunities, economic growth, poverty reduction and social cohesion. Access to finance makes transactions quicker, cheaper and safer. Most people around the world having an account in a formal financial institution serve as an entry point into formal financial sector. This study aims to analyze the status of financial inclusion in Assam with respect to demographic penetration, geographic penetration and usage ratio, i.e. credit–deposit ratio.
Design/methodology/approach
The study covers a period of 12 years from 2007–08 to 2018–19. Both the parametric and non-parametric statistical tools have been used to analyze the various dimensions of financial inclusion.
Findings
The study clearly indicates that there is a significant difference between Assam and aggregate India in financial inclusion and the status of Assam is somewhat lower as compared to the aggregate financial inclusion status of India. To achieve a satisfactory level of financial inclusion, it is not enough to open a bank account for the excluded people, but banks must look at flexibility and timeliness in services to offer a complete package to this segment of the population.
Originality/value
The study is a significant attempt to meet the shortcomings and improve banking coverage for achieving financial inclusion.
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Abstract
Purpose
This study investigates the relationships among digital transformation, technological innovation, industry–university–research collaborations and labor income share in manufacturing firms.
Design/methodology/approach
The relationships are tested using an empirical method, constructing regression models, by collecting 1,240 manufacturing firms and 9,029 items listed on the A-share market in China from 2013 to 2020.
Findings
The results indicate that digital transformation has a positive effect on manufacturing companies’ labor income share. Technological innovation can mediate the effect of digital transformation on labor income share. Industry–university–research cooperation can positively moderate the promotion effect of digital transformation on labor income share but cannot moderate the mediating effect of technological innovation. Heterogeneity analysis also found that firms without service-based transformation and nonstate-owned firms are better able to increase their labor income share through digital transformation.
Originality/value
This study provides a new path to increase the labor income share of enterprises to achieve common prosperity, which is important for manufacturing enterprises to better transform and upgrade to achieve high-quality development.
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Asad Mehmood and Francesco De Luca
This study aims to develop a model based on the financial variables for better accuracy of financial distress prediction on the sample of private French, Spanish and Italian…
Abstract
Purpose
This study aims to develop a model based on the financial variables for better accuracy of financial distress prediction on the sample of private French, Spanish and Italian firms. Thus, firms in financial difficulties could timely request for troubled debt restructuring (TDR) to continue business.
Design/methodology/approach
This study used a sample of 312 distressed and 312 non-distressed firms. It includes 60 French, 21 Spanish and 231 Italian firms in both distressed and non-distressed groups. The data are extracted from the ORBIS database. First, the authors develop a new model by replacing a ratio in the original Z”-Score model specifically for financial distress prediction and estimate its coefficients based on linear discriminant analysis (LDA). Second, using the modified Z”-Score model, the authors develop a firm TDR probability index for distressed and non-distressed firms based on the logistic regression model.
Findings
The new model (modified Z”-Score), specifically for financial distress prediction, represents higher prediction accuracy. Moreover, the firm TDR probability index accurately depicts the probabilities trend for both groups of distressed and non-distressed firms.
Research limitations/implications
The findings of this study are conclusive. However, the sample size is small. Therefore, further studies could extend the application of the prediction model developed in this study to all the EU countries.
Practical implications
This study has important practical implications. This study responds to the EU directive call by developing the financial distress prediction model to allow debtors to do timely debt restructuring and thus continue their businesses. Therefore, this study could be useful for practitioners and firm stakeholders, such as banks and other creditors, and investors.
Originality/value
This study significantly contributes to the literature in several ways. First, this study develops a model for predicting financial distress based on the argument that corporate bankruptcy and financial distress are distinct events. However, the original Z”-Score model is intended for failure prediction. Moreover, the recent literature suggests modifying and extending the prediction models. Second, the new model is tested using a sample of firms from three countries that share similarities in their TDR laws.
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The study aims to identify whether international financial reporting standards (IFRS) or local generally accepted accounting principles (GAAP) reporting provides investors and…
Abstract
Purpose
The study aims to identify whether international financial reporting standards (IFRS) or local generally accepted accounting principles (GAAP) reporting provides investors and senior management of acquirer banks with superior information on target banks under post-merger bank performance.
Design/methodology/approach
The authors examine the claim that IFRS improves corporate transparency and increases financial reporting quality in European Bank merger and acquisitions (M&As). The authors compare the financial performance of merged banks where the target and acquirer banks employed the same reporting system (up to 305 merged banks) to the performance of a control group of banks not engaged in M&A activity (up to 1,690 European banks).
Findings
Local GAAP reporting allows a more transparent assessment of financial performance using traditional indicators, making it a superior tool for assessing potential acquisition targets.
Practical implications
Overall, the empirical findings are consistent with prior studies and indicate a significant relationship between local GAAP and post-merger performance, while IFRS does not contribute to post-merger bank performance.
Originality/value
The study is one of the very few studies to investigate the relationship between bank performance, M&A activity and accounting standards in EU-28 countries. The primary contribution the finding of poor performance of IFRS reporting merged banks compared to local GAAP banks in EU-28 countries in line with prior results of Huian (2012). In addition, several deal- and bank-specific characteristics that affect accounting standards influence M&A transactions in European banks.
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This study aims to examine whether there are differences between financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and financial…
Abstract
Purpose
This study aims to examine whether there are differences between financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and financial statements prepared in accordance with local accounting standards in terms of its ability to present the financial conditions of companies listed on the Saudi Stock Exchange as one of the emerging markets.
Design/methodology/approach
Data on study variables were obtained from the published financial statements of 67 of listed companies in the Saudi Stock Exchange during the period 2014–2019. The study addressed the research hypotheses by using Altman Z-score model. Both the T-test and Wilcoxon rank test were used to investigate the significance of differences between the values of Z-score and the individual variables included in the model in the pre- and post-IFRS mandatory adoption periods.
Findings
The results revealed a decrease in the values of Z-score as well as the values of the individual variables included in the model in the period following the adoption of IFRS than it was before the adoption of IFRS, which indicates the ability of IFRS to show the financial conditions of companies more transparently than local accounting standards. However, the results of the T-test and Wilcoxon test showed that these decreases were not statistically significant.
Research limitations/implications
This study has some limitations, including the small sample size as a result of the small size of the Saudi Stock Exchange, As well as the reliance of this study only on the Altman model with its five variables in assessing financial conditions without examining the impact of other factors that may affect the financial conditions of companies.
Practical implications
Financial conditions of the companies have important implications for multiple parties such as management, government, investors and others as an early warning sign that enables them to take the necessary measures early before the actual bankruptcy occurs and what results in costs.
Originality/value
Although assessing financial conditions of the companies is one of the basic uses of accounting information, this topic has not received sufficient attention as a means to test the benefits of adopting IFRS, especially in emerging markets such as Saudi Stock Exchange. This is the first study to examine the impact of adopting IFRS on the transparency of financial reporting in assessing financial conditions in Saudi Arabia.
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