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The Effects of IFRS 7 Adoption on Bank Disclosure in Europe

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  • Jannis Bischof

Abstract

With the endorsement of IFRS 7, which became effective in 2007, the European regulation of bank disclosures has substantially changed. Using a sample of 171 banks from 28 European countries, I analyze the effect of the standard's first-time adoption on disclosure quality. I find that disclosure quality has generally increased both in financial statements and in risk reports but that the focus of disclosures has shifted from market risk exposures to credit risk exposures. The effect of the first-time adoption strongly varies across countries. These variations can be explained by differences in the enforcement and interpretation of IFRS 7 by national banking supervision. Using supervisory practices in Denmark, Italy and the UK as representative examples, I distinguish between an interventionist and a non-interventionist approach. The findings suggest that it is not only the content of IFRS 7 but also the enforcement of the standard that accounts for the increase in disclosure quality. With respect to the enforcement of bank disclosures, the results therefore support recent proposals by the De Laroisière High Level Expert Group to harmonize financial supervision within the EU.

Suggested Citation

  • Jannis Bischof, 2009. "The Effects of IFRS 7 Adoption on Bank Disclosure in Europe," Accounting in Europe, Taylor & Francis Journals, vol. 6(2), pages 167-194, December.
    • Handle: RePEc:taf:acceur:v:6:y:2009:i:2:p:167-194
    DOI: 10.1080/17449480903171988
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    Cited by:

    1. Rihab Grassa & Nejia Moumen & Khaled Hussainey, 2021. "What drives risk disclosure in Islamic and conventional banks? An international comparison," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6338-6361, October.
    2. Ibrahim, Awad Elsayed Awad & Hussainey, Khaled & Nawaz, Tasawar & Ntim, Collins & Elamer, Ahmed, 2022. "A systematic literature review on risk disclosure research: State-of-the-art and future research agenda," International Review of Financial Analysis, Elsevier, vol. 82(C).
    3. Taleb Alsarayreh & Mohammad Saleh Altarawneh & Ahmed Eltweri, 2022. "The Implication of IFRS Financial Instruments Disclosure on Value Relevance," JRFM, MDPI, vol. 15(10), pages 1-17, October.
    4. Mies, Michael, 2024. "Bank opacity, systemic risk and financial stability," Journal of Financial Stability, Elsevier, vol. 70(C).
    5. Kathrin Kureck & Susanne Homölle, 2018. "Individuals’ Perception and Processing of Risk Information: Exploratory Evidence from Germany," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 70(3), pages 255-284, July.
    6. Ann Tarca, 2020. "The IASB and Comparability of International Financial Reporting: Research Evidence and Implications," Australian Accounting Review, CPA Australia, vol. 30(4), pages 231-242, December.
    7. Barakat, Ahmed & Hussainey, Khaled, 2013. "Bank governance, regulation, supervision, and risk reporting: Evidence from operational risk disclosures in European banks," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 254-273.
    8. Bamber, Matthew & McMeeking, Kevin & Petrovic, Nikola, 2018. "Mandatory Financial Reporting Processes and Outcomes," The International Journal of Accounting, Elsevier, vol. 53(3), pages 227-245.
    9. Niclas Hellman & Jordi Carenys & Soledad Moya Gutierrez, 2018. "Introducing More IFRS Principles of Disclosure – Will the Poor Disclosers Improve?," Accounting in Europe, Taylor & Francis Journals, vol. 15(2), pages 242-321, May.
    10. Mohamed El Hedi Arouri & Aldo Lévy & Duc Khuong Nguyen, 2010. "ROE and Value Creation under IAS/IFRS: Evidence of Discordance from French Firms," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2010(3), pages 84-112.
    11. Katja Kisseleva & Daniela Lorenz, 2016. "Are level 3 fair values reflected in firm value? Evidence from European banks," ESMT Research Working Papers ESMT-16-03, ESMT European School of Management and Technology.
    12. Atanasko Atanasovski, 2015. "Empirical Investigation into the Determinants of Compliance with IFRS 7 Disclosure Requirements," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(2), pages 5-17, April.
    13. Francesca Buzzichelli & Roberto Di Pietra, 2013. "Risk profile disclosure requirements for Italian insurance companies: Differences in the financial statement preparation," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2013(1), pages 43-79.
    14. Elamer, Ahmed A. & Ntim, Collins G. & Abdou, Hussein A. & Pyke, Chris, 2020. "Sharia supervisory boards, governance structures and operational risk disclosures: Evidence from Islamic banks in MENA countries," Global Finance Journal, Elsevier, vol. 46(C).
    15. Khurram Ashfaq & Rui Zhang & Abdul Munaim & Naveed Razzaq, 2016. "An Investigation into the Determinants of Risk Disclosure in Banks: Evidence from Financial Sector of Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 1049-1058.
    16. Valentina Lagasio & Marina Brogi, 2021. "Market reaction to banks’ interim press releases: an event study analysis," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 25(1), pages 95-119, March.
    17. George Emmanuel Iatridis & Anthony Dionysus Persakis, 2012. "Bank profitability determinants under IFRSs," International Journal of Economics and Accounting, Inderscience Enterprises Ltd, vol. 3(1), pages 77-99.
    18. Peter Fiechter & Zoltán Novotny-Farkas, 2017. "The impact of the institutional environment on the value relevance of fair values," Review of Accounting Studies, Springer, vol. 22(1), pages 392-429, March.
    19. Klimczak Katarzyna, 2017. "Cross-country Differences in Reporting Practices – the Case of Provisions for Liabilities," Journal of Management and Business Administration. Central Europe, Sciendo, vol. 25(3), pages 20-33, September.
    20. 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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