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value relevance of accounting numbers and the implications for international accounting standards harmonization: Evidence from Saudi Arabia and Kuwait

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Date Issued:
2003
Summary:
This study examines whether accounting standards or institutional factors are the prime determinants of differences in value relevance of accounting numbers across countries. The motivation for this study arises from ongoing accounting harmonization efforts to increase the comparability of financial reporting across countries. Proponents of harmonization agree that investors support the need for comparability. Opponents, on the other hand, argue that efforts toward a common set of accounting standards worldwide may not achieve comparability as long as economical, cultural, and political differences exist across countries. So, the question is whether the application of common accounting standards result in enhanced comparability of financial statements, given that firms operate in different countries with different regulatory and cultural influences. This study examines the relationship between reported financial figures and both stock prices and returns across Saudi, Kuwait, the U.S., and U.S. listed firms that use international accounting standards (IAS-sample) to determine whether there are differences in the value relevance of their accounting numbers. Saudi and Kuwait have similar environments. However, they use different GAAPs. Saudi uses U.S. GAAP and Kuwait uses IAS. As a benchmark, this study uses samples of firms that use U.S. GAAP, and that use IAS, with both samples listing in the U.S. capital market. To determine whether accounting standards play a large role in differences in value relevance across these countries, four comparisons are performed: (1) Saudi and the U.S.; (2) Kuwait and IAS-sample; (3) Saudi and Kuwait; and (4) the U.S. and IAS-sample. The results show that there are significant differences in the value relevance between countries that apply the same standards but have different institutional factors. On the other hand, there are no significant differences, in most cases, in the value relevance between countries that apply different standards but operate in a similar environment. Moreover, this study attempts to determine whether earnings conservatism differs across these countries. This study provides evidence that institutional factors affect the differences in earnings conservatism. The findings of this study suggest that international harmonization of accounting standards may not be easily accomplished because institutional factors play an influential role in information dissemination.
Title: The value relevance of accounting numbers and the implications for international accounting standards harmonization: Evidence from Saudi Arabia and Kuwait.
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Name(s): Alsalman, Ahmad M.
Florida Atlantic University, Degree grantor
Skantz, Terrance R.
Type of Resource: text
Genre: Electronic Thesis Or Dissertation
Date Issued: 2003
Publisher: Florida Atlantic University
Place of Publication: Boca Raton, Fla.
Physical Form: application/pdf
Extent: 116 p.
Language(s): English
Summary: This study examines whether accounting standards or institutional factors are the prime determinants of differences in value relevance of accounting numbers across countries. The motivation for this study arises from ongoing accounting harmonization efforts to increase the comparability of financial reporting across countries. Proponents of harmonization agree that investors support the need for comparability. Opponents, on the other hand, argue that efforts toward a common set of accounting standards worldwide may not achieve comparability as long as economical, cultural, and political differences exist across countries. So, the question is whether the application of common accounting standards result in enhanced comparability of financial statements, given that firms operate in different countries with different regulatory and cultural influences. This study examines the relationship between reported financial figures and both stock prices and returns across Saudi, Kuwait, the U.S., and U.S. listed firms that use international accounting standards (IAS-sample) to determine whether there are differences in the value relevance of their accounting numbers. Saudi and Kuwait have similar environments. However, they use different GAAPs. Saudi uses U.S. GAAP and Kuwait uses IAS. As a benchmark, this study uses samples of firms that use U.S. GAAP, and that use IAS, with both samples listing in the U.S. capital market. To determine whether accounting standards play a large role in differences in value relevance across these countries, four comparisons are performed: (1) Saudi and the U.S.; (2) Kuwait and IAS-sample; (3) Saudi and Kuwait; and (4) the U.S. and IAS-sample. The results show that there are significant differences in the value relevance between countries that apply the same standards but have different institutional factors. On the other hand, there are no significant differences, in most cases, in the value relevance between countries that apply different standards but operate in a similar environment. Moreover, this study attempts to determine whether earnings conservatism differs across these countries. This study provides evidence that institutional factors affect the differences in earnings conservatism. The findings of this study suggest that international harmonization of accounting standards may not be easily accomplished because institutional factors play an influential role in information dissemination.
Identifier: 9780496673896 (isbn), 12079 (digitool), FADT12079 (IID), fau:8990 (fedora)
Collection: FAU Electronic Theses and Dissertations Collection
Note(s): College of Business
Thesis (Ph.D.)--Florida Atlantic University, 2003.
Subject(s): Accounting--Standards
Financial statements--Standards
Investment analysis--Saudi Arabia
Investment analysis--Kuwait
International economic relations--Standards
Strategic alliances (Business)--Middle East
Held by: Florida Atlantic University Libraries
Persistent Link to This Record: http://purl.flvc.org/fau/fd/FADT12079
Sublocation: Digital Library
Use and Reproduction: Copyright © is held by the author, with permission granted to Florida Atlantic University to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
Use and Reproduction: http://rightsstatements.org/vocab/InC/1.0/
Host Institution: FAU
Is Part of Series: Florida Atlantic University Digital Library Collections.