Compliance with international financial reporting standards (IFRS) and the value relevance of accounting information in emerging stock markets : evidence from Kuwait

Since the 1960s, the value relevance of accounting information has been an important topic in accounting research. The value relevance research provides evidence as to whether accounting numbers relate to corporate value in a predicted manner (Beaver, 2002). Such research is not only important for investors but also provides useful insights into accounting reporting effectiveness for standard setters and other users. Both the quality of accounting standards used and the effectiveness associated with implementing these standards are fundamental prerequisites for high value relevance (Hellstrom, 2006). However, while the literature comprehensively documents the value relevance of accounting information in developed markets, little attention has been given to emerging markets where the quality of accounting standards and their enforcement are questionable. Moreover, there is currently no known research that explores the association between level of compliance with International Financial Reporting Standards (IFRS) and the value relevance of accounting information. Motivated by the lack of research on the value relevance of accounting information in emerging markets and the unique institutional setting in Kuwait, this study has three objectives. First, it investigates the extent of compliance with IFRS with respect to firms listed on the Kuwait Stock Exchange (KSE). Second, it examines the value relevance of accounting information produced by KSE-listed firms over the 1995 to 2006 period. The third objective links the first two and explores the association between the level of compliance with IFRS and the value relevance of accounting information to market participants. Since it is among the first countries to adopt IFRS, Kuwait provides an ideal setting in which to explore these objectives. In addition, the Kuwaiti accounting environment provides an interesting regulatory context in which each KSE-listed firm is required to appoint at least two external auditors from separate auditing firms. Based on the research objectives, five research questions (RQs) are addressed. RQ1 and RQ2 aim to determine the extent to which KSE-listed firms comply with IFRS and factors contributing to variations in compliance levels. These factors include firm attributes (firm age, leverage, size, profitability, liquidity), the number of brand name (Big-4) auditing firms auditing a firm’s financial statements, and industry categorization. RQ3 and RQ4 address the value relevance of IFRS-based financial statements to investors. RQ5 addresses whether the level of compliance with IFRS contributes to the value relevance of accounting information provided to investors. Based on the potential improvement in value relevance from adopting and complying with IFRS, it is predicted that the higher the level of compliance with IFRS, the greater the value relevance of book values and earnings. The research design of the study consists of two parts. First, in accordance with prior disclosure research, the level of compliance with mandatory IFRS is examined using a disclosure index. Second, the value relevance of financial statement information, specifically, earnings and book value, is examined empirically using two valuation models: price and returns models. The combined empirical evidence that results from the application of both models provides comprehensive insights into value relevance of accounting information in an emerging market setting. Consistent with expectations, the results show the average level of compliance with IFRS mandatory disclosures for all KSE-listed firms in 2006 was 72.6 percent; thus, indicating KSE-listed firms generally did not fully comply with all requirements. Significant variations in the extent of compliance are observed among firms and across accounting standards. As predicted, older, highly leveraged, larger, and profitable KSE-listed firms are more likely to comply with IFRS required disclosures. Interestingly, significant differences in the level of compliance are observed across the three possible auditor combinations of two Big-4, two non-Big 4, and mixed audit firm types. The results for the price and returns models provide evidence that earnings and book values are significant factors in the valuation of KSE-listed firms during the 1995 to 2006 period. However, the results show that the value relevance of earnings and book values decreased significantly during that period, suggesting that investors rely less on financial statements, possibly due to the increase in the available non-financial statement sources. Notwithstanding this decline, a significant association is observed between the level of compliance with IFRS and the value relevance of earnings and book value to KSE investors. The findings make several important contributions. First, they raise concerns about the effectiveness of the regulatory body that oversees compliance with IFRS in Kuwait. Second, they challenge the effectiveness of the two-auditor requirement in promoting compliance with regulations as well as the associated cost-benefit of this requirement for firms. Third, they provide the first known empirical evidence linking the level of IFRS compliance with the value relevance of financial statement information. Finally, the findings are relevant for standard setters and for their current review of KSE regulations. In particular, they highlight the importance of establishing and maintaining adequate monitoring and enforcement mechanisms to ensure compliance with accounting standards. In addition, the finding that stricter compliance with IFRS improves the value relevance of accounting information highlights the importance of full compliance with IFRS and not just mere adoption.

The Relationship Between Liquidity, Trading Activity and Return - Studies of the Finnish and Swedish Stock Markets

Liquidity, or how easy an investment is to buy or sell, is becoming increasingly important for financial market participants. The objective of this dissertation is to contribute to the understanding of how liquidity affects financial markets. The first essays analyze the actions taken by underwriters immediately after listing to improve liquidity of IPO stock. To estimate the impact of underwriter activity on the pricing of the IPOs, the order book during the first weeks of trading in the IPO stock is studied. Evidence of stabilization and liquidity enhancing activities by underwriters is found. The second half of the dissertation is concerned with the daily trading of stocks where liquidity may be impacted by policy issues such as changes in taxes or exchange fees and by opening the access to the markets for foreign investors. The desirability of a transaction tax on securities trading is addressed. An increase in transaction tax is found to cause lower prices and higher volatility. In the last essay the objective is to determine if the liquidity of a security has an impact on the return investors require. The results support the notion that returns are negatively correlated to liquidity.

Markets, marketing and production issues for aquaculture in East Africa: the case of Uganda

Aquaculture is currently responsible for an insignificant proportion of total fish production in Uganda. However, given the increasing demand for fresh fish in urban and peri-urban araes, and threats to the supply of fish from natural catch fisheries, the potential exists for a strong market in aquaculture. Small-scale fish farmers located relatively close to markets or all-season roads, and who can supply consistent and high quality produce, will have the widest range of marketing opportunities, and will likely be within the area of operation of potential traders and intermediaries that deliver fish to markets. Fish farmers that are not close to roads, or produce unreliable quantities and variable quality products may face high transaction costs of marketing their product, and decreasing net returns to production. The authors found that significant on-farm labor, and access to input markets are important factors leading to positive net returns to fish production. Areas with high population density and relatively low wages will be well suited to labor intensive aquaculture. The authors concluded that aquaculture development has good potential in certain areas of Uganda and should therefore be pursued as a potential development pathway. However, policy makers should consider the importance of the price of fresh fish relative to the cost of labor, as well as other factors including the importance of smallholder credit and access to extension services, when directing investments in aquaculture technology.

The Diminishing Returns to Trade Policy in the European Union

The notion that the EU is a trade power is central to studies of the Union’s international presence. Credible threats to withhold access to Europe’s markets are said to provide the Union with leverage in respect of other trade partners. This paper queries the continuing ability of the European Union to act effectively this way. The current Doha malaise is a symptom of deeper changes in the international trade system. As emerging markets become more affluent and participate in foreign direct investment, their interest in market access per se become less important relative to other areas of regulation.

An analysis of implied volatility jump dynamics: Novel functional data representation in crude oil markets

The predominant fear in capital markets is that of a price spike. Commodity markets differ in that there is a fear of both upward and down jumps, this results in implied volatility curves displaying distinct shapes when compared to equity markets. The use of a novel functional data analysis (FDA) approach, provides a framework to produce and interpret functional objects that characterise the underlying dynamics of oil future options. We use the FDA framework to examine implied volatility, jump risk, and pricing dynamics within crude oil markets. Examining a WTI crude oil sample for the 2007–2013 period, which includes the global financial crisis and the Arab Spring, strong evidence is found of converse jump dynamics during periods of demand and supply side weakness. This is used as a basis for an FDA-derived Merton (1976) jump diffusion optimised delta hedging strategy, which exhibits superior portfolio management results over traditional methods.

Metalearner based on Dynamic Neural Network for Strategic Bidding in electricity Markets

The restructuring of electricity markets, conducted to increase the competition in this sector, and decrease the electricity prices, brought with it an enormous increase in the complexity of the considered mechanisms. The electricity market became a complex and unpredictable environment, involving a large number of different entities, playing in a dynamic scene to obtain the best advantages and profits. Software tools became, therefore, essential to provide simulation and decision support capabilities, in order to potentiate the involved players’ actions. This paper presents the development of a metalearner, applied to the decision support of electricity markets’ negotiation entities. The proposed metalearner executes a dynamic artificial neural network to create its own output, taking advantage on several learning algorithms implemented in ALBidS, an adaptive learning system that provides decision support to electricity markets’ players. The proposed metalearner considers different weights for each strategy, depending on its individual quality of performance. The results of the proposed method are studied and analyzed in scenarios based on real electricity markets’ data, using MASCEM - a multi-agent electricity market simulator that simulates market players’ operation in the market.

Multi-agent Simulation of Bilateral Contracting in Competitive Electricity Markets

Traditional vertically integrated power utilities around the world have evolved from monopoly structures to open markets that promote competition among suppliers and provide consumers with a choice of services. Market forces drive the price of electricity and reduce the net cost through increased competition. Electricity can be traded in both organized markets or using forward bilateral contracts. This article focuses on bilateral contracts and describes some important features of an agent-based system for bilateral trading in competitive markets. Special attention is devoted to the negotiation process, demand response in bilateral contracting, and risk management. The article also presents a case study on forward bilateral contracting: a retailer agent and a customer agent negotiate a 24h-rate tariff.

Letter - Sergio Marchi to Donald Ziraldo, 1999

A letter from the Honourable Sergio Marchi, Minister for International Trade to Donald Ziraldo to discuss the status of the EU Commission and wine issues. He commits to "opening markets for Canadian wine exports to the European Union". The letter is dated 23 April, 1999.

A Comparative Study Of The Organisation And Management Of Notihed Markets In Bangladesh With The Organisation And Management Of Regulated Markets In West Bengal India

For improving agricultural marketing, which has been discussed in the previous chapter, the Government has intervened in different ways. The direct regulatory role through the regulation of markets and market practices is one of the ways in which governmental intervention can improve agricultural marketing. This study is an enquiry of the direct regulatory role of the government through regulation of markets and market practices. By restructuring the operational methods and redesigning the existing physical markets, this system gives direct benefit to the cultivating class and protects them from the market manipulations of organised and powerful private traders. If traders do not continue their trade for the time being they will not be affected financially, because they are resourceful or financially solvent. On the other hand, Cultivators must sell their produce immediately after harvesting for the lack of additional facilities or to satisfy other needs for which finance is required. Another important reason is that Cultivators/farmers are not organised and because of lack of their organisation, they sell their produces individually. In this situation, a farmer is helpless when astute traders indulge in manipulations at the time of purchase of the produces. So it is the government's obligation to protect the interest of the farmers. Protection of the farmer/cultivator is necessary not only from the point of social justice but also from that of economic growth. If the farmers are assured of a remunerative or incentive price for their produce, they will get the inspiration to produce more and through more production, economy will be developed and the nation as a whole will be benefitted. This study will examine the management system of the markets through the direct regulatory role played by the governments to control markets and market practices in West Bengal and Bangladesh.

Domestic policy responses to the food price crisis: The case of Bolivia

In face of the global food crisis of 2007-2008, severe concerns arose about how developing countries would be affected by the extreme short-term fluctuations in international commodity prices. We examine the effects of the crisis on Bolivia, one of the poorest countries of the Americas. We focus on the effectiveness of the domestic policy interventions in preventing spillovers of the development of international food prices to domestic markets. Using a cointegration model, we study price interdependencies of wheat flour, sunflower oil and poultry. The analysis suggests that the policy measures taken had little effect on food security during the food crisis. Throughout the entire period, perfect price transmission between the Bolivian poultry and sunflower oil markets and the respective international reference markets existed. Bolivian prices were determined by international prices and the policy interventions in the markets of these two commodities were not found to have had an effect. The government's large-scale wheat flour imports did not shield Bolivian consumers from the shocks of international prices.

From Market- to Development Orientation - The Trade Aspect of Food Security and Agriculture

Trade rules are suggested to be one of the reasons for the hunger in the world and environmental damage. As current trade rules encourage market orientation and therefore specialization and industrialization of agriculture, which has as side effects rural hunger and environmental damage, there is room for improvement in the international trade regime. One main finding of Nexus Foundations' work in Geneva is a possible new orientation for agricultural and food markets – an orientation on development, rather than purely on markets. This development orientation consists of several elements from development of soil fertility to local markets and consumer relatedness. Since the Bali Ministerial in 2013, the WTO has set up a four year work programme on the issue of food security related to food reserves. This opens the chance to discuss broader food security issues in the realm of trade negotiations.

A framework of brand value in B2B markets: the contributing role of functional and emotional components

The creation of value is admittedly a critical task for marketers regardless of industry. This paper focuses on a type of value that has traditionally been perceived as irrelevant to industrial markets and argues that brand value facilitates the progression from goods and services value to relationship value. To address the limited amount of research on B2B branding from the suppliers' point of view, we complement insights gained from a literature review with ten exploratory interviews with B2B supplier managers, and develop a framework of brand value applicable to industrial markets. This identifies both the functional (i.e., quality, technology, capacity, infrastructure, after sales service, capabilities, reliability, innovation) and emotional qualities (i.e., risk reduction, reassurance, trust) important for the development of industrial brand equity. Situational (e.g. nature of the purchase) and environmental factors (e.g. the economic situation) affecting suppliers' perceptions of the importance of brand in a B2B context and the role of functional versus emotional brand qualities are discussed. The value of the brand as a driver for the development of business to business relationships is also highlighted. The framework provides a basis for B2B practitioners to build their brands in such a way as to make a functional as well as an emotional connection with buyers that is more likely to lead to a supplier–buyer relationship.

Unlisted property funds and the emerging property markets

This paper sets out to describe the changing nature of global property investment, to provide background information regarding the nature of unlisted property funds and their managers and investors, and especially the role played by unlisted property funds in facilitating cross-border investing. In particular, it focuses on the development of unlisted funds as intermediary structures carrying institutional capital from developed to developing markets. It presents the results of new research by UK research firm Property Funds Research (PFR) and the University of Reading which explores the extent to which this new vehicle has been effective in delivering capital to emerging markets. The research relates the number of funds targetting particular countries and to population and GDP per capita. It finds that there is a very strong relationship between the popularity of a country for investment through this vehicle format and these independent variables. More interesting, perhaps, is the identification of outlier countries where the amount of investment is significantly less - or greater - than that predicted by population and GDP per capita.

e-Government as a regulatory response to the financial crisis: the case of the UK

This paper seeks to discuss EU policies relating to securities markets, created in the wake of the financial crisis and how ICT and specifically e-Government can be utilised within this context. This study utilises the UK as a basis for our discussion. The recent financial crisis has caused a change of perspective in relation to government services and polices. The regulation of the financial sector has been heavily criticised and so is undergoing radical change in the UK and the rest of Europe. New regulatory bodies are being defined with more focus on taking a risk-based system-wide approach to regulating the financial sector. This approach aims to prevent financial institutions becoming too big to fail and thus require massive government bail outs. In addition, a new wave of EU regulation is in the wind to update risk management practices and to further protect investors. This paper discusses the reasons for the financial crisis and the UK’s past and future regulatory landscape. The current and future approach and strategies adopted by the UK’s financial regulators are reviewed as is the lifecycle of EU Directives. The regulatory responses to the crisis are discussed and upcoming regulatory hotspots identified. Discussion of these issues provides the context for our evaluation of the role e-Government and ICT in improving the regulatory system. We identify several processes, which are elementary for regulatory compliance and discuss how ICT is elementary in their implementation. The processes considered include those required for internal control and monitoring, risk management, record keeping and disclosure to regulatory bodies. We find these processes offer an excellent opportunity to adopt an e-Government approach to improve services to both regulated businesses and individual investors through the benefits derived from a more effective and efficient regulatory system.

The functions of intermediaries in Swedish SMEs internationalization to the Nigerian market

Over the years so many academic literatures has revealed that increased number of firms have seen internationalization as a means to gain and sustain competitive advantage and even increase economic of scale, and this has led many western companies to emerging markets. In this paper we discovered that among the pool of Swedish firms, only the MNEs have seen Nigerian market attractive to internationalize to, but just a few of the Swedish SMEs has expanded to the Nigerian market. This research was conducted by doing a qualitative study with the use of phenomenological research approach, during our investigation on the functions of intermediaries in Swedish SMEs internationalization to Nigeria market.Furthermore, we were able to understand the importance and functions of the different marketing intermediaries’ in Swedish SMEs internationalization to Nigeria market. These intermediaries equip the Swedish firms with the required objective knowledge of the Nigerian market, updating them with recent development of the opportunities and threats involved in the Nigerian marketing environment, and linking these Swedish firms to the required government departments, distributors, agent/broker, customers, middle men etc, thereby impacting them with the experiential knowledge. Moreover, it is important for firms to have objective or pre-market knowledge of a particular market before entering that market, but this knowledge is regarded as non-helpful knowledge to firms. But the experiential knowledge is acquired over time in the market, which is regarded as the helpful knowledge. It is evident that the intermediaries equip these firms with both objective and experiential knowledge.Although the opportunities in some emerging markets are very attractive, but the threats in these markets are other factors firms also put into consideration before internationalizing to these markets. This is why thorough market research has to be done so that firms can create effective marketing strategies when they want to expand their marketing activities to emerging markets. Despite the risk and uncertainties involved in doing business in foreign countries, still yet companies selling global products do not have any choice than to internationalize their marketing operations.