THE VALUE RELEVANCE OF MANDATORY CORPORATE DISCLOSURES: EVIDENCE FROM KUWAIT

Mishari Alfraih and Faisal Alanezi

The International Journal of Business and Finance Research, 2015, vol. 9, issue 3, 1-18

Abstract: This study is the first to explore the association between the level of compliance with International Financial Reporting Standards (IFRS) mandatory disclosures and the value relevance of accounting information to market participants. This association is examined in the context of listed companies in the emerging economy of Kuwait – a jurisdiction with a history of applying international accounting standards but with lax enforcement. The research design of the study consists of two parts. First, the level of compliance with mandatory IFRS disclosures of Kuwait Stock Exchange (KSE) listed firms in 2010 is examined using a disclosure index. Second, the value relevance of financial statement information, specifically, earnings and book values, is examined empirically using Ohlson’s (1995) valuation model that captures the level of compliance with IFRS among KSE listed firms. The results show a significant association between the level of compliance with IFRS and the value relevance of earnings and book values to KSE investors, highlighting the importance of establishing and maintaining adequate monitoring and enforcement mechanisms to ensure compliance with accounting standards. The outcomes of this study serve to inform regulators and companies on whether moving toward stricter compliance with IFRS will necessarily improve the value relevance of financial statement information

Keywords: Value Relevance; International Financial Reporting Standards; Compliance; Disclosure Index; Kuwait (search for similar items in EconPapers)
JEL-codes: M48 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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