EconPapers    
Economics at your fingertips  
 

ROE and Value Creation under IAS/IFRS: Evidence of Discordance from French Firms

Mohamed Arouri (), Aldo Lévy and Duc Khuong Nguyen

European Financial and Accounting Journal, 2010, vol. 2010, issue 3, 84-112

Abstract: This paper re-examines the effects that adoption of the International Financial Reporting Standards (IFRS) has had on financial reporting of French listed firms. By analysing the 2004 financial statements of CAC 40 companies, we show that the transition to the IAS/IFRS has a significant impact on the return on equity (ROE) of considered firms by increasing it by 25 basis points on average, compared to the French GAAP. This finding thus suggests an amplified degree of discordance between the ROE, as a crucial measure of firm performance, and the value creation process following the IFRS adoption. From a theoretical viewpoint, Merton (1987)'s capital asset pricing model (CAPM) with incomplete information, which claims its convergence to its traditional version through the reduction of information costs, cannot in fact be valid, owing to divergences in the assessment of a firm's performance.

Keywords: Financial leverage; IAS/IFRS; Return on equity (search for similar items in EconPapers)
JEL-codes: L25 M41 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://efaj.vse.cz/doi/10.18267/j.efaj.57.html (text/html)
http://efaj.vse.cz/doi/10.18267/j.efaj.57.pdf (application/pdf)
free of charge

Related works:
Working Paper: ROE and value creation under IAS-IFRS: evidence of discordance from French firms (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:prg:jnlefa:v:2010:y:2010:i:3:id:57:p:84-112

Ordering information: This journal article can be ordered from
European Financial and Accounting Journal, University of Economics, Prague, nám. W. Churchilla 4, 130 67 Prague 3, Czech Republic
http://efaj.vse.cz

DOI: 10.18267/j.efaj.57

Access Statistics for this article

European Financial and Accounting Journal is currently edited by Efaj Journal

More articles in European Financial and Accounting Journal from Prague University of Economics and Business Contact information at EDIRC.
Bibliographic data for series maintained by Stanislav Vojir ().

 
Page updated 2021-06-04
Handle: RePEc:prg:jnlefa:v:2010:y:2010:i:3:id:57:p:84-112