The International Financial Reporting Standards 9 financial instruments, information quality and stock returns in the modern technology era

Purpose - This paper investigates the relationship between information quality and stock returns during the International Financial Reporting Standards (IFRS 9) pre-adoption announcements and examines the influence of modern technology on these relationships across 24 emerging countries. Design/methodology/approach - This paper conducts an event study using data obtained from the DataStream, Osiris, International Telecommunication Union (ITU) and the World Bank databases from 2009 to 2014. The non-linear generalized additive model (GAM) was implemented to test the study hypotheses. Findings - Results indicate a significant positive non-linear relationship between low information quality and stock returns during IFRS 9 pre-adoption announcements. This result implies that IFRS 9 announcements have a positive impact on corporations with low pre-adoption quality information. This result is also more pronounced in small rather than large corporations and financial rather than nonfinancial institutions. Furthermore, modern technology plays a significant decisive antecedent role, while industry type has a moderating effect on the relationship between information quality and stock returns. The codified legal system has a positive impact on stock returns across emerging countries. Research limitations/implications - Data unavailability in some emerging countries. Practical implications - The empirical evidence provides useful guidelines for corporate managers, investors, international accounting standard-setters and regulators to improve financial reporting practices. Originality/value - This paper extends the work of Armstronget al.(2010); Onaliet al.(2017) by including the impact of non-linear relationships using GAM analysis and the role of modern technology across emerging countries.