Is Financial Reporting Quality Affected by Economic Policy Uncertainty? Evidence from Conditional Conservatism around the World

2021 ◽  
Author(s):  
Andy Chun Wai Chui ◽  
Kuo-Chiang (John) Wei
Keyword(s):  
Economic Policy ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty ◽  
Conditional Conservatism ◽  
The World

International financial reporting standards and conservatism in the Association of Southeast Asian Nations countries

2018 ◽  
Vol 26 (4) ◽  
pp. 487-510 ◽  
Author(s):  
Marziana Madah Marzuki ◽  
Effiezal Aswadi Abdul Wahab
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Asymmetric Timeliness ◽  
Conditional Conservatism ◽  
Two Measures ◽  
Asean Countries ◽  
Laws And Regulations

Purpose The purpose of this paper is to investigate whether the convergence of IFRS in ASEAN countries resulted in an improvement in financial-reporting quality, and in particular with regards the degree of conditional conservatism of financial reporting. Then, the authors investigate whether the convergence to IFRS and the degree of conditional conservatism is influenced by corruption as a proxy for the strength of ASEAN jurisdiction legal and enforcement systems. Design/methodology/approach The sample of this study is based on 22,085 firm-year observations from three ASEAN countries, namely, Malaysia, Thailand and Singapore from 2008 to 2014. This study employs a panel least square regression to test the effect of IFRS on two measures of conservatism which are asymmetric timeliness and accrual-based loss recognition. The conservatism data are extracted from ORBIS, while data for corruptions are extracted from Corruption Perception Index (CPI) that was released by Transparency International. Findings This study finds Convergence of IFRS enhance conditional conservatism. The findings are robust for two measures of conservatism which are asymmetric timeliness and accrual-based loss recognition. The result on unconditional conservatism finds that IFRS reduce unconditional conservatism, which supports that the code-law structures of the ASEAN countries as characterized by unconditional conservatism is reduced after IFRS convergence. A further test indicates that corruption reduces conditional conservatism in more corrupt countries. Research limitations/implications This study focused on three ASEAN countries only, as they have consistent convergence dates to the IFRS. Therefore the result may not be generalized to other ASEAN countries. Practical implications The study provides implications to the regulators that IFRS enhance financial-reporting quality and reduce the randomness of decisions that are based on financial information as has been introduced by unconditional conservatism. Therefore it is important for the regulators to incorporate IFRS compliance into laws and regulations. Currently, IFRS compliance is not incorporated into laws and regulations for ASEAN countries, except for Malaysia. In Malaysia, Section 7 of the Financial Reporting Act 1997 (FRA) empowers the Malaysian Accounting Standards Board (MASB) to issue approved accounting standards for application in Malaysia. Under section 26D of the FRA, financial statements that are prepared or lodged with the Central Bank, Securities Commission or Registrar of Companies must comply with the standards issued by the MASB. Originality/value This paper extends the literature on the effect of IFRS on conservatism as it provides robust effect of IFRS on both conditional and unconditional conservatism. In addition, this study extends the literatures on the effect of corruptions in the relationship between IFRS and conditional conservatism.

THE ROLES OF ECONOMIC POLICY UNCERTAINTY AND THE COVID-19 PANDEMIC IN THE CORRELATION BETWEEN CRYPTOCURRENCY AND STOCK MARKETS

2020 ◽  
pp. 1-30
Author(s):  
LINGLING QIAN ◽  
YUEXIANG JIANG ◽  
HUAIGANG LONG ◽  
RUOYI SONG
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
The United States ◽  
Mixed Data ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty ◽  
Market Portfolio ◽  
Hedging Strategies ◽  
The World ◽  
The Impact

We are the first to explore the effect of economic policy uncertainty (EPU) and the COVID-19 pandemic on the correlation between the cryptocurrency index CRIX and the world stock market portfolio, as well as the hedging properties of CRIX. To this end, we mainly apply the dynamic conditional correlation model with mixed data sampling regressions, a threshold vector autoregressive model and the generalized impulse response function. We demonstrate that the correlation is influenced by the uncertainty stance of the economy and behaves differently in low-, medium- and high-uncertainty periods. Most of the abnormal market relations exist in high levels of EPU or during the COVID-19 period, and the impact of global EPU is greater than that of EPU originating in the United States, Europe, Russia and China. Moreover, the CRIX can serve as a hedge asset against the world stock market. The high (low) level of EPU has a significantly positive (negative) effect on the optimal hedge ratio of CRIX, which increases significantly during the COVID-19 period. Our findings have implications for risk management, portfolio allocations and hedging strategies.

scholarly journals Financial reporting under economic policy uncertainty

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Peterson Kitakogelu Ozili
Keyword(s):  
Economic Policy ◽  
Financial Reporting ◽  
Fair Value ◽  
Policy Uncertainty ◽  
Fair Value Accounting ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
New Information ◽  
Accounting Numbers ◽  
The Relationship

Purpose This paper aims to discuss financial reporting under economic policy uncertainty. Design/methodology/approach The paper uses discourse analysis to examine financial reporting under economic policy uncertainty. Findings The paper identifies the link between economic policy uncertainty and financial reporting, in terms of earnings management and fair value accounting. It argues that high economic policy uncertainty will transmit fewer new information to firms which can motivate managers to influence accounting numbers in the direction of the desired financial reporting outcome. Originality/value The relationship between economic policy uncertainty and financial reporting has not been studied. This paper is one of the first papers to relate economic policy uncertainty to financial reporting behavior.

THE IMPACT OF ECONOMIC POLICY UNCERTAINTY ON INDUSTRIAL PRODUCTION IN THE UNITED STATES: PRE-PANDEMIC EVIDENCE

2021 ◽  
Author(s):  
Dejan Romih
Keyword(s):  
United States ◽  
Economic Policy ◽  
Industrial Production ◽  
Vector Autoregression ◽  
The United States ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty ◽  
The World ◽  
Growing Body ◽  
The Impact

Although the Covid-19 pandemic (the Great Lockdown), which began in March 2020, is not over yet (mainly due to new SARS-CoV-2 variants, such as Delta), there is already a growing body of evidence that suggests that the Covid-19 pandemic has contributed to an increase in economic policy uncertainty in the United States and the rest of the world. In this paper, I examine the impact of economic policy uncertainty on industrial production in the United States before the Covid-19 pandemic. Using vector autoregression, I found that industrial production in the United States responds negatively to a positive economic policy uncertainty shock in the United States. This suggests that US economic policymakers need to prevent economic policy uncertainty in the United States

scholarly journals The Role of IFRS on Financial Reporting Quality and Global Convergence: A Conceptual Review

2019 ◽  
Vol 3 (1) ◽  
pp. 67
Author(s):  
Auwalu Musa
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Accounting Quality ◽  
Ifrs Adoption ◽  
The World ◽  
Timely Loss Recognition

This study examines the role of International Financial Reporting Standards on financial reporting quality and the global convergence. The IFRS adoption is already an issue of global relevance across countries of the world due to the quest for uniformity, reliability and comparability of financial statements of companies. The adoption of IFRS in Europe is an example of accounting quality across-borders with different institutional frameworks and enforcement rules. This allows investigating whether, and to what extent accounting regulation per se can affect the quality of financial reporting and leads to convergence in financial reporting. Specifically, the study review how the change in the recognition and measurement of firms operating accrual item, the loan loss provision, affects income smoothing behaviour and timely loss recognition. The study found that the IFRS convergence reduces the scope for earnings management, is related to more timely loss recognition and leads to more value relevant accounting measures. Thus, the study reviews background and guidance on the change in financial reporting quality following extensive IFRS adoption around the world countries. The study found that a difference in accounting quality is related to country’s overall infrastructure setting. The study also highlights the importance of investor protection for financial reporting quality and the need for regulators to design mechanisms that limit managers' earnings management practice. The study found from different literatures that the adoption of IFRS leads to higher quality of accounting numbers and improve foreign direct investment across countries.

scholarly journals On the Impact of COVID-19-Related Uncertainty

2020 ◽  
Author(s):  
Marta Castellini ◽  
Michael Donadelli ◽  
Ivan Gufler
Keyword(s):  
Economic Policy ◽  
Business Cycle ◽  
Recovery Time ◽  
Policy Uncertainty ◽  
Political Uncertainty ◽  
Economic Policy Uncertainty ◽  
Construction Education ◽  
Operating Margin ◽  
The World ◽  
The Impact

COVID-19 has generated a substantial increase in the level of economic policy uncertainty (EPU) around the World. Recent empirical investigations suggest that the COVID-19 has played a key role in amplifying the overall level of political uncertainty. In Italy, where anti-COVID-19 measures were implemented with some delay and were badly communicated, EPU rose dramatically. We examine the implications of rising COVID-19-related uncertainty for company revenues, gross operating margin and employment in 16 different Italian sectors. Our findings indicate construction, education, manufacturing activities and hospitality as the most hit sectors, with an average short-term drop in company revenues of around 4% in annual terms and a recovery time of almost two years. Thus, COVID-19-related uncertainty is found to be a significant business cycle driver.

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