The impact of IFRS on financial statement data in Greece

Abstract

Purpose – The purpose of this paper is to examine the effects of IFRS adoption on financial statement data and their usefulness in Greece. Additionally, the authors examine the effect on the informativeness/usefulness of financial statement data for stock prices in Greece and the effect of the Greek Financial Crisis. Design/methodology/approach – This study examine the effects of IFRS adoption on financial statement data and their usefulness in Greece. Additionally, the authors examine the effect on the informativeness/usefulness of financial statement data for stock prices in Greece and the effect of the Greek Financial Crisis. Findings – The results indicate that several financial ratios were dramatically affected by IFRS adoption in Greece. In contrast to other countries, IFRS has not resulted in improved statistical behavior of these ratios in Greece: the ratios are highly skewed and the normality of their distribution is not improved. Additionally, when examining the usefulness of financial statement data for stock prices in Greece, results indicate that IFRS adoption did not necessarily improve the usefulness of the financial statements. However, the authors do find that since the financial crisis in Greece these IFRS financial statement measures are significant when regressed on stock prices. Research limitations/implications – The authors are not able to necessarily rule out other causal factors that may have occurred in Greece during the sample period. The authors do look at the financial crisis as a potential confounding factor, but other factors such as political or macroeconomic factors have not necessarily been ruled out. Also, this study only examines the Greek situation. Practical implications – This study may have implications for other countries in similar situations as that found in Greece – IFRS adoption and severe economic crisis. Originality/value – To date only the impact of IFRS on earnings, stockholders’ equity, and some financial ratios has been investigated in prior Greek research studies (Hellenic Capital Market Commission, 2006; Grant Thornton, 2006). However, no academic research has been developed in this area. In addition, the authors examine the impact of IFRS on stock prices emphasizing the mandatory financial disclosure and IFRS adoption in a financially and politically distressed country – Greece.