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The economic consequences of IFRS adoption: Evidence from New Zealand

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  • Houqe, Muhammad Nurul
  • Monem, Reza M.
  • Zijl, Tony van

Abstract

This paper investigates the economic consequences of adoption of IFRS for reporting by New Zealand listed companies as indicated by the effect on the cost of equity capital. We analyse a sample of 290 firm year observations on New Zealand listed companies over the periods 1998–2002 and 2009–2013. We find that there is a significant negative association between IFRS adoption and the cost of equity capital. These results are robust to several variations in model specification and sample composition. To the extent that higher quality accounting standards reduce the cost of equity capital, the result suggests that IFRS is a higher quality set of accounting standards than pre IFRS New Zealand GAAP. This is the first study to provide empirical evidence on the impact of adoption of IFRS on the cost of equity capital of New Zealand companies. The evidence supports the findings for European companies and thus points to the benefits potentially available to companies in countries that have yet to adopt IFRS, such as US and Japan.

Suggested Citation

  • Houqe, Muhammad Nurul & Monem, Reza M. & Zijl, Tony van, 2016. "The economic consequences of IFRS adoption: Evidence from New Zealand," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 27(C), pages 40-48.
    • Handle: RePEc:eee:jiaata:v:27:y:2016:i:c:p:40-48
    DOI: 10.1016/j.intaccaudtax.2016.10.001
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    3. M N, Nikhil & Chakraborty, Suman & B M, Lithin & Lobo, Lumen Shawn, 2023. "Does the adoption of Ind AS affect the performance of firms in India?," MPRA Paper 117247, University Library of Munich, Germany, revised 18 Apr 2023.
    4. Ines Kateb & Ines Belgacem, 2024. "Navigating governance and accounting reforms in Saudi Arabia's emerging market: impact of audit quality, board characteristics, and IFRS adoption on financial performance," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(2), pages 290-312, June.
    5. Georgakopoulos, Georgios & Gounopoulos, Dimitrios & Huang, Chen & Patsika, Victoria, 2022. "The impact of IFRS adoption on IPOs management earnings forecasts in Australia," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 48(C).
    6. Meshram, Vedprakash Vasantrao & Arora, Jagriti, 2021. "Accounting constructs and economic consequences of IFRS adoption in India," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 45(C).
    7. Mehrnaz Paknezhad, 2017. "Analysis of Affecting Factors on IFRS Adoption:Case Study in Iran," Management and Organizational Studies, Management and Organizational Studies, Sciedu Press, vol. 4(1), pages 74-81, January.
    8. El-Helaly, Moataz & Ntim, Collins G. & Al-Gazzar, Manar, 2020. "Diffusion theory, national corruption and IFRS adoption around the world," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 38(C).
    9. Solomon Opare & Muhammad Nurul Houqe & Tony van Zijl, 2021. "Meta‐analysis of the Impact of Adoption of IFRS on Financial Reporting Comparability, Market Liquidity, and Cost of Capital," Abacus, Accounting Foundation, University of Sydney, vol. 57(3), pages 502-556, September.

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