The Value Relevance of Accounting Numbers in Presence of the Equity Method Before and After IFRS 11: Evidence from France

Frederic Pourtier, Frederique Bardinet Evraert and Veronique Darmendrail
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Frederic Pourtier: IRGO - Institut de Recherche en Gestion des Organisations - UB - Université de Bordeaux - Institut d'Administration des Entreprises (IAE) - Bordeaux
Frederique Bardinet Evraert: IRGO - Institut de Recherche en Gestion des Organisations - UB - Université de Bordeaux - Institut d'Administration des Entreprises (IAE) - Bordeaux
Veronique Darmendrail: IRGO - Institut de Recherche en Gestion des Organisations - UB - Université de Bordeaux - Institut d'Administration des Entreprises (IAE) - Bordeaux

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Abstract: This article studies the effects of IFRS 11 on the value relevance of accounting numbers (VRAN) in France. In 2014, IFRS 11 made the equity method (EM) mandatory to account for joint ventures (JVs) and disallowed proportionate consolidation, the method previously preferred by French groups. Panel method regressions are used to examine the evolution of value relevance in listed groups' financial statements over a long period (2007–2020). Generalization of the EM reallocates the VRAN, and post-IFRS 11 EM-related numbers are significantly and negatively linked to market value, raising questions about their faithfulness. These results concern all groups using the EM, whatever method they previously used for JVs. This study also looks at the standard-setters' proposed integral/non-integral classification of net income from JVs and associates, which is found to be non-value relevant. These results have implications at standard-setting level for improving the quality of financial reporting, and for investors. © 2023 European Accounting Association.

Keywords: Equity method; IFRS 11; Value redevance; Stock price; France (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

Published in Accounting in Europe, 2023, 20 (2), pp.194-224. ⟨10.1080/17449480.2023.2192235⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04441725

DOI: 10.1080/17449480.2023.2192235

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