Economic benefits of International Financial Reporting Standards (IFRS) adoption in Romania: Has the cost of equity capital decreased?
| Autor: | Ion Ionascu, Mihaela Ionascu, Stere Mihai |
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| Rok vydání: | 2012 |
| Předmět: |
Finance
Weighted average cost of capital business.industry Economic capital Accounting International Financial Reporting Standards Historical cost Financial capital Cost of capital Economics General Earth and Planetary Sciences business Return on capital Equity capital markets General Environmental Science |
| Zdroj: | AFRICAN JOURNAL OF BUSINESS MANAGEMENT. 6 |
| ISSN: | 1993-8233 |
| DOI: | 10.5897/ajbm11.1738 |
| Popis: | The purpose of this paper is to identify a possible economic benefit of International Financial Reporting Standards (IFRS) adoption in Romania. Among the economic benefits of their adoption, the IFRSs increase transparency, diminish information asymmetry and risk and consequently reduce the cost of capital. In order to determine whether the cost of equity capital decreased as a result of IFRS adoption in Romania, we modeled the cost of equity capital as the expected return on the intrinsic value of a share, and computed it based on pre- and post-adoption samples. The results showed that the average cost of equity capital did decrease after the IFRSs were adopted in Romania, from 0.33 (computed based on a pre-adoption sample) to 0.13, the IFRSs providing the economic benefit of a reduced cost of capital for Romanian listed companies. Key words: Cost of capital, disclosure quality, benefits of International Financial Reporting Standards (IFRS) adoption in Romania. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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