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The risk relevance of International Financial Reporting Standards: Evidence from Greek banks

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  • Papadamou, Stephanos
  • Tzivinikos, Trifon

Abstract

The main purpose of the paper is to estimate market, interest rate and exchange rate risk of Greek financial institutions and to explore the relationship between market-based measures of risk and accounting variables before and after the adoption of International Financial Reporting Standards (IFRS) in order to examine whether IFRS introduction enhances the information content of accounting data. Empirical results reveal that all banks are exposed to market risk while interest rate and exchange rate risk affect them occasionally. Moreover, the IFRS introduction reinforces the explanatory ability of accounting data, on systematic and non-systematic risks. Concerning the risk-relevance of accounting ratios, liquidity measures, credibility, earnings per share and provisions for credit loss are inversely related to systematic and non-systematic risks under IFRS. Moreover, loans to total assets ratio, interest rate spread and income diversification are directly associated with market measures of risk, while bank size is negatively related to both risk measures under IFRS. Our findings imply that the fair value orientation of IFRS is responsible for the higher risk-relevance of fundamentals as opposed to the historically oriented Greek Accounting Standards (GAS).

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  • Papadamou, Stephanos & Tzivinikos, Trifon, 2013. "The risk relevance of International Financial Reporting Standards: Evidence from Greek banks," International Review of Financial Analysis, Elsevier, vol. 27(C), pages 43-54.
    • Handle: RePEc:eee:finana:v:27:y:2013:i:c:p:43-54
    DOI: 10.1016/j.irfa.2012.09.006
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    More about this item

    Keywords

    Market risk; Accounting variables; IFRS; Non-systematic risk; Banking;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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