Does the Adoption of IFRS Increase the Usefulness of Voluntary Bank Disclosures Globally?

• In Event: International Accounting 2

Abstract

This study examines the value relevance of voluntary human resource disclosures and the effect of the adoption of International Financial Reporting Standards (IFRS) on the value relevance of these disclosures. Human capital disclosures allow capital market participants to evaluate the intellectual capital of the disclosing firms, which enables market participants to assess the competitiveness of the firm’s human resource strategy and the productivity of the workforce vis-à-vis benchmark performance. While IFRS does not mandate particular form of VHCD, VHCD is expected to possess information content that is useful to market participants in their equity pricing decisions. The results provide strong evidence suggesting that market participants consider VHCD to be value relevant and incorporate changes in labor cost information into their pricing decisions. The results also indicate that the mandatory adoption of IFRS increases the value relevance of labor costs, but decreases the value relevance of these disclosures for firms that voluntarily adopt IFRS. Finally, the results indicate that VHCD is value relevant for voluntary IFRS adopters in the civil law countries prior to mandatory IFRS adoption but not after the mandatory adoption and that changes in VHCD provided by the firms being incorporated into changes in equity returns both before and after mandatory adoption.

Author

• Mohamed A Elbannan, American University Cairo