Abstract:
In this thesis, I examine the value relevance of financial statements for companies that chose to voluntarily adopt International Financial Reporting Standards in New Zealand between 2005 and 2007, prior to it becoming mandatory for all companies. Specifically, I document the relative and incremental value relevance, respectively, of voluntarily adopting New Zealand International Financial Reporting Standards as opposed to domestically produced New Zealand Financial Reporting Standards on the book value of equity and net income for a sample of 34 companies. The main results of the empirical analysis find that (i) there is no evidence to suggest that the value relevance of the book value of equity and net income calculated under New Zealand International Financial Reporting Standards, when taken together, is greater than the combined value relevance of the book value of equity and net income calculated under domestically produced New Zealand Financial Reporting Standards (i.e., New Zealand International Financial Reporting Standards do not have relative value relevance); (ii) the book value of equity calculated under New Zealand International Financial Reporting Standards does not have incremental value relevance over and above the book value of equity calculated under domestically produced New Zealand Financial Reporting Standards; and (iii) net income calculated under New Zealand International Financial Reporting Standards does not have incremental value relevance over and above net income calculated under domestically produced New Zealand Financial Reporting Standards. I also carry out an analysis of the conservativeness of the net income figure measured under New Zealand International Financial Reporting Standards, and find that there is no significant difference in the timeliness or asymmetric timeliness (i.e., conditional conservatism) between net income calculated under New Zealand International Financial Reporting Standards and domestically produced New Zealand Financial Reporting Standards. Overall, my thesis finds little evidence that the voluntary adoption of New Zealand International Financial Reporting Standards provides accounting information that is more value relevant to that under domestically produced New Zealand Financial Reporting Standards, which is consistent with the conclusion of Hung & Subramanyam (2007) albeit in the German institutional setting. Hence, the benefits of early adoption of International Financial Reporting Standards in New Zealand are questionable.