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How IFRS Affects Value Relevance and Key Financial Indicators? Evidence from the UK

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  • Yhlas Sovbetov

Abstract

This paper has two contributions to the International Financial Reporting Stands (IFRS) adoption literature. First is the scrutinizing impact of IFRS adoption on value relevance in the UK with TEST-A analysis under the H01 hypothesis. The second contribution is capturing the impact of IFRS adoption on key financial indicators of firms with the TEST-B analysis that hypothesizes H02.The statistical differences of items of two different reporting standards are examined with non-parametric tests as all input variables failed the Shapiro-Wilk and Lilliefors normality tests in TEST-A. The finding rejects the H01 hypothesis for BvMv, and agrees that IFRS has impact on value relevance. Besides, Ohlson's (1995) model documents that the coefficient of dummy variable (MODE) is positive. Therefore, the analysis concludes that IFRS has positive impact on value relevance. The aftermath of TEST-B rejects the H02 hypothesis for all profitability ratios (ROE, ROCE, ROA, PM) and gearing ratios (GR). It concludes that profitability and gearing ratios are affected by IFRS adoption, whereas efficiency-liquidity ratios are not. Also, in Forward Stepwise regression analysis only ROCE, ROA, and PM ratios show significant results. The analysis documents positive and significant impact of IFRS on these three ratios.

Suggested Citation

  • Yhlas Sovbetov, 2025. "How IFRS Affects Value Relevance and Key Financial Indicators? Evidence from the UK," Papers 2512.02480, arXiv.org.
    • Handle: RePEc:arx:papers:2512.02480
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    References listed on IDEAS

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    1. Holger Daske & Luzi Hail & Christian Leuz & Rodrigo Verdi, 2008. "Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 46(5), pages 1085-1142, December.
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    3. Krishnankutty, Raveesh & Chakraborty, K. S., 2011. "Determinants of current ratios: a study with reference to companies listed in Bombay stock exchange," MPRA Paper 35063, University Library of Munich, Germany.
    4. Karol Marek KLIMCZAK, 2011. "Market Reaction to Mandatory IFRS Adoption: Evidence from Poland," Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 10(2), pages 228-248, June.
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