The effect of IFRS convergence on risk disclosure: an investigation into the Indian accounting system

Saravanan R., Mohammad Firoz, Sumit Dalal
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Abstract

Purpose This study aims to empirically investigate the effect of International Financial Reporting Standards (IFRS) convergence on corporate risk disclosure, with a particular emphasis on the quantity and coverage of risk information. The research also conducts economic benefit and cost analysis to investigate the economic implications that may arise from the transition to IFRS reporting. Design/methodology/approach A content analysis approach is used to measure two broader dimensions of risk disclosure, namely, risk disclosure quantity and risk topic coverage. Furthermore, using firm-fixed effect regression on a sample of 143 Indian-listed companies, this study investigates the variations in these risk disclosure dimensions before (2012–2016) and subsequent to (2017–2021) the convergence with IFRS. Findings The empirical results of this research demonstrate that IFRS convergence has led to a significant improvement in firms’ risk disclosure across several dimensions. Particularly, during the post-IFRS period, firms’ usage of risk-related words and sentences has considerably surged in MD&A, Notes and whole annual reports. In addition, upon IFRS convergence, firms’ risk descriptions have become more extensive and evenly distributed across risk topic categories. Moreover, the in-depth benefit and cost analysis revealed that firms reporting under IFRS benefit from decreased cost of equity capital, but they also incur a higher cost of audit fees. Originality/value This study contributes to the literature in two ways. First, this is the only study, to the best of the authors’ knowledge, to conduct a broader examination of the impact of mandatory IFRS convergence on corporate risk disclosure, with a major focus on quantity and coverage of risk information. Second, by conducting economic benefit and cost analysis, this study provides novel insights into the critical role of IFRS risk disclosures toward multiple economic outcomes.
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国际财务报告准则趋同对风险披露的影响:对印度会计制度的调查
本研究旨在实证研究国际财务报告准则(IFRS)趋同对企业风险披露的影响,特别强调风险信息的数量和覆盖范围。该研究还进行了经济效益和成本分析,以调查过渡到国际财务报告准则报告可能产生的经济影响。设计/方法/方法采用内容分析法测量风险披露的两个更广泛的维度,即风险披露数量和风险主题覆盖范围。此外,本研究对143家印度上市公司的样本使用公司固定效应回归,研究了这些风险披露维度在与国际财务报告准则趋同之前(2012-2016)和之后(2017-2021)的变化。本研究的实证结果表明,IFRS趋同导致企业在多个维度上的风险披露显著改善。尤其在后国际财务报告准则时期,公司对风险相关词汇和句子的使用在MD&A,附注和整个年度报告中大幅增加。此外,在IFRS趋同之后,公司的风险描述变得更加广泛,并且在风险主题类别中均匀分布。此外,深入的收益和成本分析表明,采用国际财务报告准则的公司受益于权益资本成本的降低,但它们也招致了更高的审计费用成本。独创性/价值本研究在两个方面对文献做出了贡献。首先,据作者所知,这是唯一一项对强制性IFRS趋同对企业风险披露的影响进行更广泛考察的研究,主要关注风险信息的数量和覆盖范围。其次,通过进行经济效益和成本分析,本研究为国际财务报告准则风险披露对多种经济结果的关键作用提供了新的见解。
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来源期刊
CiteScore
7.90
自引率
3.00%
发文量
28
期刊介绍: The International Journal of Accounting & Information Management focuses on publishing research in accounting, finance, and information management. It specifically emphasizes the interaction between these research areas on an international scale and within both the private and public sectors. The aim of the journal is to bridge the knowledge gap between researchers and practitioners by covering various issues that arise in the field. These include information systems, accounting information management, innovation and technology in accounting, accounting standards and reporting, and capital market efficiency.
期刊最新文献
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