Empirical Studies in Financial Accounting Defended on Thursday, 6 September 2012
This dissertation contributes to the stream of literature that examines the role of accounting information in capital markets. The first two chapters deal with the economic consequences of changes in accounting regulations. The third chapter examines the relation between accounting information and asset prices. Chapter 1 studies the impact of International Financial Reporting Standards (IFRS) adoption on the cost of equity and liquidity of European banks. The adoption of IFRS is associated with lower cost of equity particularly for banks with low pre-adoption quality of information environment. Chapter 2 examines the effect of IFRS adoption on the risk exposure of banks in Europe. Our analysis shows an increase in the risk exposure of banks after the mandatory adoption of the new accounting standards. We provide limited evidence that the increase in risk exposure is more pronounced for banks that operate in countries where accounting numbers are more likely to be used for contracting purposes. Chapter 3 focuses on the relation between aggregate earnings changes and corporate bond market returns. Aggregate earnings changes are negatively related to investment-grade corporate bond market returns and unrelated to high-yield corporate bond market returns. Further, the earnings-returns relation is lower for high-rated and long-term corporate bonds. These findings suggest that aggregate earnings contain information about cash flows and discount rates. Overall, the essays in this thesis highlight the importance of changes in accounting regulations and the significance of accounting information for equity and debt investors.
ifrs cost of capital; liquidity; risk exposure; bank; aggregate earnings; corporate bond markets