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The Value Relevance Of Mandatory Corporate Disclosures: Evidence From Kuwait

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  • Mishari Alfraih
  • Faisal Alanezi

Abstract

This study is the first to explore the association between the level of compliance with International Financial Reporting Standards (IFRS) mandatory disclosures and the value relevance of accounting information to market participants. This association is examined in the context of listed companies in the emerging economy of Kuwait – a jurisdiction with a history of applying international accounting standards but with lax enforcement. The research design of the study consists of two parts. First, the level of compliance with mandatory IFRS disclosures of Kuwait Stock Exchange (KSE) listed firms in 2010 is examined using a disclosure index. Second, the value relevance of financial statement information, specifically, earnings and book values, is examined empirically using Ohlson’s (1995) valuation model that captures the level of compliance with IFRS among KSE listed firms. The results show a significant association between the level of compliance with IFRS and the value relevance of earnings and book values to KSE investors, highlighting the importance of establishing and maintaining adequate monitoring and enforcement mechanisms to ensure compliance with accounting standards. The outcomes of this study serve to inform regulators and companies on whether moving toward stricter compliance with IFRS will necessarily improve the value relevance of financial statement information

Suggested Citation

  • Mishari Alfraih & Faisal Alanezi, 2015. "The Value Relevance Of Mandatory Corporate Disclosures: Evidence From Kuwait," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 9(3), pages 1-18.
    • Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:3:p:1-18
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    References listed on IDEAS

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    1. Street, Donna L. & Bryant, Stephanie M., 2000. "Disclosure Level and Compliance with IASs: A Comparison of Companies With and Without U.S. Listings and Filings," The International Journal of Accounting, Elsevier, vol. 35(3), pages 305-329, September.
    2. Mary E. Barth & Wayne R. Landsman & Mark H. Lang, 2008. "International Accounting Standards and Accounting Quality," Journal of Accounting Research, Wiley Blackwell, vol. 46(3), pages 467-498, June.
    3. Khaled Aljifri & Abdulkareem Alzarouni & Chew Ng & Mohammad Iqbal Tahir, 2014. "The Association between Firm Characteristics and Corporate Financial Disclosures: Evidence from UAE Companies," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 8(2), pages 101-123.
    4. Ball, R & Brown, P, 1968. "Empirical Evaluation Of Accounting Income Numbers," Journal of Accounting Research, Wiley Blackwell, vol. 6(2), pages 159-178.
    5. Al-Shammari, Bader & Brown, Philip & Tarca, Ann, 2008. "An investigation of compliance with international accounting standards by listed companies in the Gulf Co-Operation Council member states," The International Journal of Accounting, Elsevier, vol. 43(4), pages 425-447, December.
    6. Katerina Hellstrom, 2006. "The Value Relevance of Financial Accounting Information in a Transition Economy: The Case of the Czech Republic," European Accounting Review, Taylor & Francis Journals, vol. 15(3), pages 325-349.
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    Cited by:

    1. MNIF, Yosra & TAHARI, Marwa, 2022. "Audit committee characteristics and compliance by Islamic banks with AAOIFI accounting standards," Advances in accounting, Elsevier, vol. 57(C).

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    More about this item

    Keywords

    Value Relevance; International Financial Reporting Standards; Compliance; Disclosure Index; Kuwait;
    All these keywords.

    JEL classification:

    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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