Using diff-in-diff approaches and the propensity-score matching, this study focuses on firm-level Tobin´s q and Market-to-book outcomes for Brazilian firms who in 2008 were required by Law 11.638/07 to adopt the full International Financial Reporting Standards (IFRS) by 2010. Brazil’s tier-system of corporate governance standards for publicly-traded firms, its uniquely wholesale adoption of the IFRS, and the previously considerable gap between its national GAAP and IFRS readily lend the scenario to research, which thus far finds small or inconsistent results when focused on IFRS adoption-related outcomes in Europe and China. However, while these features recommend the transitioned Brazilian equity market to analysis, additional unique features, such as its small population size and its limited historical data -- of varied quality – increase the challenge in selecting a suitable empirical methodology. Using quarterly data from 2006-2011, control firms in the Nivel II and Novo Mercado tiers of Bovespa which already complied with higher quality accounting standards are matched to treatment firms in the Regular and Nivel I tiers with similar averaged values of size and sector. Our results suggest that there is a positive impact on Tobin´s q and Market-to-book for firms who are forced to adopt IFRS in Brazil. We can observe the same results when we consider all variables winsorized at 5% level. We also find a positive relation between the firm value (measured by Tobin´s q and Market-to-book) and net income. Firms with higher net income are more likely to have higher Tobin´s q and Market-tobook. In an opposite way, we find a negative relation among firm value, size, Ebit-to-sales, sales growth and PPE-to-sales. All results are statistically significant at 1% level. '
Date: 2017-03
Authors:
Sampaio, Joelson Oliveira
Gallucci Netto, Humberto
Silva, Vinícius Augusto Brunassi
This document brings together a set of latest data points and publicly available information relevant for Retail & Consumer Goods Industry. We are very excited to share this content and believe that readers will benefit immensely from this periodic publication immensely.
This document brings together a set of latest data points and publicly available information relevant for Financial Services. We are very excited to share this content and believe that readers will benefit immensely from this periodic publication immensely.
This document brings together a set of latest data points and publicly available information relevant for Retail & Consumer Goods Industry. We are very excited to share this content and believe that readers will benefit immensely from this periodic publication immensely.
This document brings together a set of latest data points and publicly available information relevant for Financial Services. We are very excited to share this content and believe that readers will benefit immensely from this periodic publication immensely.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Utilizing HFM to Handle the Requirements of IFRSAlithya
Ranzal Practice Director and Oracle ACE, Peter Fugere guides attendees through best practices on building HFM applications to consider the impact of IFRS. HFM has been used for years to do multi-GAAP reporting, so IFRS is not completely uncharted waters. Many companies in Europe and Canada have already moved, and their experience provides guidance for companies in North America. HFM has specific functionality that makes the IFRS transition easier and for North America, moving now may minimize costs later associated with statutory reporting and historical data collection.
This presentation contains author's research on significance of IND AS implementation. The author found that traditional profit measure based on PAT and IND AS based Total Comprehensive Income are not significantly different. Also impact of first time adoption of Ind AS is not significant.
briefly compare the IASB and FASB in regards to the convergence proc.pdfajayelectronisyavatm
briefly compare the IASB and FASB in regards to the convergence process. Give your opinion
on the reasons why a single set of accounting principles would be beneficial to corporations.
Explain your rationale.
Solution
WHY IS IT IMPORTANT TO HAVE MORE COMPARABLE GLOBAL ACCOUNTING
STANDARDS? HOW DOES THAT EFFORT FIT WITH THE FASB’S MISSION?
The first priority of the Financial Accounting Standards Board (FASB) is to improve financial
reporting for the benefit of investors and other users of financial information in U.S. capital
markets. We do that by striving to set the highest-quality standards, which collectively are
known as Generally Accepted Accounting Principles (GAAP). By highest quality, we mean
standards that provide users of financial statements with information that is clear, useful, and
relevant to their needs, while considering whether the expected benefits of that information
justify the costs of providing and using it.
The FASB believes that seeking more comparable global accounting standards—improving the
quality of accounting standards used around the world while reducing differences among those
standards—is consistent with its core mission. Investors, companies, auditors, and other
participants in the U.S. financial reporting system benefit from the increased comparability that
can result from the closer alignment of standards used internationally. More comparable
standards have the potential to reduce costs for both users and preparers of financial statements
and make worldwide capital markets more efficient. The Securities and Exchange Commission
(SEC) expects the FASB to consider, in developing standards, the extent to which international
comparability is necessary or appropriate in the public interest and for the protection of
investors.
HOW DOES THE FASB SEEK GREATER COMPARABILITY?
As we conclude the bilateral convergence program begun in 2002 by the FASB and the
International Accounting Standards Board (IASB), the FASB has implemented a three-part
strategy for seeking greater comparability in accounting standards internationally:
Developing High Quality GAAP Standards
The FASB continually strives to meet the needs of investors and other users of GAAP-based
financial reports, both within and outside the United States, by improving the quality of GAAP.
The FASB believes that the high-quality standards it develops will continue to influence the
shape and future direction of international standards, as they have for more than 40 years. By
creating high-quality standards through a best-in-class standard-setting process, the FASB serves
as a reference point and benchmark for others. In other words, we will continue to lead by setting
an example of excellence.
As it undertakes standard-setting projects, the FASB carefully evaluates whether U.S. financial
reporting would be improved by implementing approaches consistent with particular IFRS
standards. This also would enhance international comparability for the benefit of investor.
Explain whether you think IFRS and GAAP will be fully converged. Wha.pdfarpitaeron555
Explain whether you think IFRS and GAAP will be fully converged. What is the current status of
convergence projects?
Solution
There has been a concerted convergence effort between the Generally Accepted Accounting
Principles (GAAP) and the International Financial Reporting Standards (IFRS) in order to avoid
conflict and confusion, promote simplicity, streamlining, consistency and transparency, and
avoid any future financial crises or meltdowns.
Despite the research-indicated evidence of a higher accounting quality being experienced by
firms that either apply the IFRS standards or have switched to them from the GAAP, the
convergence process has not proven to be an easy task, mostly because of the differences in
approach between the two accounting bodies.
The GAAP is a rules-based methodology, while the IFRS takes a principle-based approach. The
rules-based approach is comprised of a complex set of guidelines that establishes criteria for
every possible contingency and provides the rules required for specified transactions, thus
promoting uniformity. The principle-based methodology lays out the key objectives of good
reporting in each subject area and then provides guidance, explaining the objective, and relates it
to common examples, thus promoting transparency.
If these methodological differences between the two approaches cannot be resolved, they may
prolong the process of compiling a true set of international accounting standards and increase the
costs required to maintain two sets of books.
So from the above discussion it is clear that, IFRS and GAAP will be fully converged, but it will
took a time.
current status of convergence projects
One of the main concerns in the United States business world is how the convergence process
and its results will impact the future evolution of the accounting profession. This specific
concern, simply stated, is about uniformity over transparency, and it has a serious impact on the
standards development process. Could the goals of uniformity and transparency be achieved?
Are they incompatible or mutually exclusive?
This incompatibility - real or perceived - is grounded in the conflicts existing among the
constructs of rules-based and principle-based shareholder and stakeholder primacy theories,
which are recognized by the Financial Accounting Standards Board (FASB), the International
Accounting Standards Board (IASB) and the European and Asian Accounting Standards Boards,
and which have an impact on the standards development methodology. Transparency has a direct
impact on the areas of business combinations (Phase I and II), revenue recognition and financial
performance of business enterprises reporting. hence they are still in process..
Impact of ifrs disclosures on organizationalResearchWap
The following are the objectives of this study:
To examine the impact of IFRS disclosures on organizational performance
To examine the level of compliance with the IFRS disclosure principles by companies in Nigeria.
To identify the problems associated with IFRS disclosure in organizations in Nigeria.
• Determine what you believe to be the major obstacles to the conver.pdfsriammanmarketing
• Determine what you believe to be the major obstacles to the convergence process. Recommend
two (2) strategies that the IASB could use in order to improve the convergence process overall.
Justify your response.
Solution
WHY IS IT IMPORTANT TO HAVE MORE COMPARABLE GLOBAL ACCOUNTING
STANDARDS? HOW DOES THAT EFFORT FIT WITH THE FASB’S MISSION?
The first priority of the Financial Accounting Standards Board (FASB) is to improve financial
reporting for the benefit of investors and other users of financial information in U.S. capital
markets. We do that by striving to set the highest-quality standards, which collectively are
known as Generally Accepted Accounting Principles (GAAP). By highest quality, we mean
standards that provide users of financial statements with information that is clear, useful, and
relevant to their needs, while considering whether the expected benefits of that information
justify the costs of providing and using it.
The FASB believes that seeking more comparable global accounting standards—improving the
quality of accounting standards used around the world while reducing differences among those
standards—is consistent with its core mission. Investors, companies, auditors, and other
participants in the U.S. financial reporting system benefit from the increased comparability that
can result from the closer alignment of standards used internationally. More comparable
standards have the potential to reduce costs for both users and preparers of financial statements
and make worldwide capital markets more efficient. The Securities and Exchange Commission
(SEC) expects the FASB to consider, in developing standards, the extent to which international
comparability is necessary or appropriate in the public interest and for the protection of
investors.
HOW DOES THE FASB SEEK GREATER COMPARABILITY?
As we conclude the bilateral convergence program begun in 2002 by the FASB and the
International Accounting Standards Board (IASB), the FASB has implemented a three-part
strategy for seeking greater comparability in accounting standards internationally:
Developing High Quality GAAP Standards
The FASB continually strives to meet the needs of investors and other users of GAAP-based
financial reports, both within and outside the United States, by improving the quality of GAAP.
The FASB believes that the high-quality standards it develops will continue to influence the
shape and future direction of international standards, as they have for more than 40 years. By
creating high-quality standards through a best-in-class standard-setting process, the FASB serves
as a reference point and benchmark for others. In other words, we will continue to lead by setting
an example of excellence.
As it undertakes standard-setting projects, the FASB carefully evaluates whether U.S. financial
reporting would be improved by implementing approaches consistent with particular IFRS
standards. This also would enhance international comparability for the benefit of inves.
Measuring the Degree of International Harmonisation inSelected Accounting Pra...IOSRJBM
With increased pressure from businesses globalisation in financial reporting, international accounting harmonisation has become the objective of many accountants. Many states around the world have detected the significance of accounting harmonisation in their regional stock markets. Regardless of problems of accounting information reliability, emerging countries (such as Tunisia) have unpaid enough attention to accepting international standards. This study attempted to answer the following question: Has de facto harmonisation between Tunisia s financial reporting and International Financial Report Standards (IFRS) increased between 2005 and 2010? By using C index to measure de facto harmonisation, the result showed that overall compliance of accounting practise (de facto) has remained the same with 54% in both years.
What are the chances of your country winning the 2018 World Cup?
FGV's mathematical model predicts that Brazil has the greatest chances of winning.
http://fgv.br/emap/copa-2018
Interval observer for uncertain time-varying SIR-SI model of vector-borne dis...FGV Brazil
The issue of state estimation is considered for an SIR-SI model describing a vector-borne disease such as dengue fever, with seasonal variations and uncertainties in the transmission rates. Assuming continuous measurement of the number of new infectives in the host population per unit time, a class of interval observers with estimate-dependent gain is constructed, and asymptotic error bounds are provided. The synthesis method is based on the search for a common linear Lyapunov function for monotone systems representing the evolution of the estimation errors.
Date: 2017
Authors:
Soledad Aronna, Maria
Bliman, Pierre-Alexandre
More Related Content
Similar to Mandatory IFRS adoption in Brazil and firm value
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Utilizing HFM to Handle the Requirements of IFRSAlithya
Ranzal Practice Director and Oracle ACE, Peter Fugere guides attendees through best practices on building HFM applications to consider the impact of IFRS. HFM has been used for years to do multi-GAAP reporting, so IFRS is not completely uncharted waters. Many companies in Europe and Canada have already moved, and their experience provides guidance for companies in North America. HFM has specific functionality that makes the IFRS transition easier and for North America, moving now may minimize costs later associated with statutory reporting and historical data collection.
This presentation contains author's research on significance of IND AS implementation. The author found that traditional profit measure based on PAT and IND AS based Total Comprehensive Income are not significantly different. Also impact of first time adoption of Ind AS is not significant.
briefly compare the IASB and FASB in regards to the convergence proc.pdfajayelectronisyavatm
briefly compare the IASB and FASB in regards to the convergence process. Give your opinion
on the reasons why a single set of accounting principles would be beneficial to corporations.
Explain your rationale.
Solution
WHY IS IT IMPORTANT TO HAVE MORE COMPARABLE GLOBAL ACCOUNTING
STANDARDS? HOW DOES THAT EFFORT FIT WITH THE FASB’S MISSION?
The first priority of the Financial Accounting Standards Board (FASB) is to improve financial
reporting for the benefit of investors and other users of financial information in U.S. capital
markets. We do that by striving to set the highest-quality standards, which collectively are
known as Generally Accepted Accounting Principles (GAAP). By highest quality, we mean
standards that provide users of financial statements with information that is clear, useful, and
relevant to their needs, while considering whether the expected benefits of that information
justify the costs of providing and using it.
The FASB believes that seeking more comparable global accounting standards—improving the
quality of accounting standards used around the world while reducing differences among those
standards—is consistent with its core mission. Investors, companies, auditors, and other
participants in the U.S. financial reporting system benefit from the increased comparability that
can result from the closer alignment of standards used internationally. More comparable
standards have the potential to reduce costs for both users and preparers of financial statements
and make worldwide capital markets more efficient. The Securities and Exchange Commission
(SEC) expects the FASB to consider, in developing standards, the extent to which international
comparability is necessary or appropriate in the public interest and for the protection of
investors.
HOW DOES THE FASB SEEK GREATER COMPARABILITY?
As we conclude the bilateral convergence program begun in 2002 by the FASB and the
International Accounting Standards Board (IASB), the FASB has implemented a three-part
strategy for seeking greater comparability in accounting standards internationally:
Developing High Quality GAAP Standards
The FASB continually strives to meet the needs of investors and other users of GAAP-based
financial reports, both within and outside the United States, by improving the quality of GAAP.
The FASB believes that the high-quality standards it develops will continue to influence the
shape and future direction of international standards, as they have for more than 40 years. By
creating high-quality standards through a best-in-class standard-setting process, the FASB serves
as a reference point and benchmark for others. In other words, we will continue to lead by setting
an example of excellence.
As it undertakes standard-setting projects, the FASB carefully evaluates whether U.S. financial
reporting would be improved by implementing approaches consistent with particular IFRS
standards. This also would enhance international comparability for the benefit of investor.
Explain whether you think IFRS and GAAP will be fully converged. Wha.pdfarpitaeron555
Explain whether you think IFRS and GAAP will be fully converged. What is the current status of
convergence projects?
Solution
There has been a concerted convergence effort between the Generally Accepted Accounting
Principles (GAAP) and the International Financial Reporting Standards (IFRS) in order to avoid
conflict and confusion, promote simplicity, streamlining, consistency and transparency, and
avoid any future financial crises or meltdowns.
Despite the research-indicated evidence of a higher accounting quality being experienced by
firms that either apply the IFRS standards or have switched to them from the GAAP, the
convergence process has not proven to be an easy task, mostly because of the differences in
approach between the two accounting bodies.
The GAAP is a rules-based methodology, while the IFRS takes a principle-based approach. The
rules-based approach is comprised of a complex set of guidelines that establishes criteria for
every possible contingency and provides the rules required for specified transactions, thus
promoting uniformity. The principle-based methodology lays out the key objectives of good
reporting in each subject area and then provides guidance, explaining the objective, and relates it
to common examples, thus promoting transparency.
If these methodological differences between the two approaches cannot be resolved, they may
prolong the process of compiling a true set of international accounting standards and increase the
costs required to maintain two sets of books.
So from the above discussion it is clear that, IFRS and GAAP will be fully converged, but it will
took a time.
current status of convergence projects
One of the main concerns in the United States business world is how the convergence process
and its results will impact the future evolution of the accounting profession. This specific
concern, simply stated, is about uniformity over transparency, and it has a serious impact on the
standards development process. Could the goals of uniformity and transparency be achieved?
Are they incompatible or mutually exclusive?
This incompatibility - real or perceived - is grounded in the conflicts existing among the
constructs of rules-based and principle-based shareholder and stakeholder primacy theories,
which are recognized by the Financial Accounting Standards Board (FASB), the International
Accounting Standards Board (IASB) and the European and Asian Accounting Standards Boards,
and which have an impact on the standards development methodology. Transparency has a direct
impact on the areas of business combinations (Phase I and II), revenue recognition and financial
performance of business enterprises reporting. hence they are still in process..
Impact of ifrs disclosures on organizationalResearchWap
The following are the objectives of this study:
To examine the impact of IFRS disclosures on organizational performance
To examine the level of compliance with the IFRS disclosure principles by companies in Nigeria.
To identify the problems associated with IFRS disclosure in organizations in Nigeria.
• Determine what you believe to be the major obstacles to the conver.pdfsriammanmarketing
• Determine what you believe to be the major obstacles to the convergence process. Recommend
two (2) strategies that the IASB could use in order to improve the convergence process overall.
Justify your response.
Solution
WHY IS IT IMPORTANT TO HAVE MORE COMPARABLE GLOBAL ACCOUNTING
STANDARDS? HOW DOES THAT EFFORT FIT WITH THE FASB’S MISSION?
The first priority of the Financial Accounting Standards Board (FASB) is to improve financial
reporting for the benefit of investors and other users of financial information in U.S. capital
markets. We do that by striving to set the highest-quality standards, which collectively are
known as Generally Accepted Accounting Principles (GAAP). By highest quality, we mean
standards that provide users of financial statements with information that is clear, useful, and
relevant to their needs, while considering whether the expected benefits of that information
justify the costs of providing and using it.
The FASB believes that seeking more comparable global accounting standards—improving the
quality of accounting standards used around the world while reducing differences among those
standards—is consistent with its core mission. Investors, companies, auditors, and other
participants in the U.S. financial reporting system benefit from the increased comparability that
can result from the closer alignment of standards used internationally. More comparable
standards have the potential to reduce costs for both users and preparers of financial statements
and make worldwide capital markets more efficient. The Securities and Exchange Commission
(SEC) expects the FASB to consider, in developing standards, the extent to which international
comparability is necessary or appropriate in the public interest and for the protection of
investors.
HOW DOES THE FASB SEEK GREATER COMPARABILITY?
As we conclude the bilateral convergence program begun in 2002 by the FASB and the
International Accounting Standards Board (IASB), the FASB has implemented a three-part
strategy for seeking greater comparability in accounting standards internationally:
Developing High Quality GAAP Standards
The FASB continually strives to meet the needs of investors and other users of GAAP-based
financial reports, both within and outside the United States, by improving the quality of GAAP.
The FASB believes that the high-quality standards it develops will continue to influence the
shape and future direction of international standards, as they have for more than 40 years. By
creating high-quality standards through a best-in-class standard-setting process, the FASB serves
as a reference point and benchmark for others. In other words, we will continue to lead by setting
an example of excellence.
As it undertakes standard-setting projects, the FASB carefully evaluates whether U.S. financial
reporting would be improved by implementing approaches consistent with particular IFRS
standards. This also would enhance international comparability for the benefit of inves.
Measuring the Degree of International Harmonisation inSelected Accounting Pra...IOSRJBM
With increased pressure from businesses globalisation in financial reporting, international accounting harmonisation has become the objective of many accountants. Many states around the world have detected the significance of accounting harmonisation in their regional stock markets. Regardless of problems of accounting information reliability, emerging countries (such as Tunisia) have unpaid enough attention to accepting international standards. This study attempted to answer the following question: Has de facto harmonisation between Tunisia s financial reporting and International Financial Report Standards (IFRS) increased between 2005 and 2010? By using C index to measure de facto harmonisation, the result showed that overall compliance of accounting practise (de facto) has remained the same with 54% in both years.
What are the chances of your country winning the 2018 World Cup?
FGV's mathematical model predicts that Brazil has the greatest chances of winning.
http://fgv.br/emap/copa-2018
Interval observer for uncertain time-varying SIR-SI model of vector-borne dis...FGV Brazil
The issue of state estimation is considered for an SIR-SI model describing a vector-borne disease such as dengue fever, with seasonal variations and uncertainties in the transmission rates. Assuming continuous measurement of the number of new infectives in the host population per unit time, a class of interval observers with estimate-dependent gain is constructed, and asymptotic error bounds are provided. The synthesis method is based on the search for a common linear Lyapunov function for monotone systems representing the evolution of the estimation errors.
Date: 2017
Authors:
Soledad Aronna, Maria
Bliman, Pierre-Alexandre
Ensuring successful introduction of Wolbachia in natural populations of Aedes...FGV Brazil
The control of the spread of dengue fever by introduction of the intracellular parasitic bacterium Wolbachia in populations of the vector Aedes aegypti, is presently one of the most promising tools for eliminating dengue, in the absence of an efficient vaccine. The success of this operation requires locally careful planning to determine the adequate number of individuals carrying the wolbachia parasite that need to be introduced into the natural population. The introduced mosquitoes are expected to eventually replace the Wolbachia-free population and guarantee permanent protection against the transmission of dengue to human. In this study, we propose and analyze a model describing the fundamental aspects of the competition between mosquitoes carrying Wolbachia and mosquitoes free of the parasite. We then use feedback control techniques to devise an introduction protocol which is proved to guarantee that the population converges to a stable equilibrium where the totality of mosquitoes carry Wolbachia.
Date: 2015-03-19
Authors:
Bliman, Pierre-Alexandre
Soledad Aronna, Maria
Coelho, Flávio Codeço
Silva, Moacyr da
The resource curse reloaded: revisiting the Dutch disease with economic compl...FGV Brazil
This paper shows that the Dutch disease can be more formally characterised as low economic complexity using ECI-type indicators; there is a solid and robust inverse relationship between exports concentrating on natural resources and economic complexity as measured by complexity indicators for a database of 122 countries from 1963 to 2013. In a large majority of cases, oil answers for shares in excess of 50% of exports. In addition to empirical panel analysis, we address case studies concerned with Indonesia and Nigeria and introduce a brief review of the theoretical literature on the topic. Indonesia is considered in the literature as a good example in avoiding the negative effects of the Dutch disease, whereas Nigeria is taken as a bad example in terms of institutions and policies adopted during the seventies and eighties. The empirical results show that complexity analysis and Big Data may offer significant contributions to the still-current debate surrounding the Dutch disease.
Date: 2017-03
Authors:
Camargo, Jhean Steffan Martines de
Gala, Paulo
The Economic Commission for Latin America (ECLA) was right: scale-free comple...FGV Brazil
The main purpose of this paper is to apply big-data and scale-free complex network techniques to the study of world trade, with a specific focus on the investigation of ECLA and structuralist ideas. A secondary objective is to illustrate the potentialities of the use of the new science of complex networks in economics, in what has been recently referred to as an econophysics research agenda. We work with a trade network of 101 countries and 762 products (SITC-4) which generated 1,756,224 trade links in 2013. The empirical results based on network analysis and computational methods reported here point in the direction of what ECLA economists used to argue; countries with higher income per capita concentrate in producing and exporting manufactured and complex goods at the center of the trade network; countries with lower income per capita specialize in producing and exporting non-complex commodities at the network’s periphery.
Date: 2017-03
Authors:
Gala, Paulo
Camargo, Jhean Steffan Martines de
Freitas, Elton
Cost of equity estimation for the Brazilian market: a test of the Goldman Sac...FGV Brazil
As an approach to determining the degree of integration of the Brazilian economy, this paper seeks to test the explanatory power of the Goldman Sachs Model for the expected returns by a foreign investor in the Brazilian market during the past eleven years (2004-2014). Using data for the stocks of 57 of the most actively traded firms at the BM&FBovespa, it begins by testing directly the degree of integration of the Brazilian economy during this period, in an attempt to better understand the context in which the model has been used. In sequence, in an indirect test of the Goldman Sachs model, the risk factor betas (market risk and country risk) of the sample stocks were estimated and a panel regression of expected stock returns on these betas was performed. It was found that country risk is not a statistically significant explanation of expected returns, indicating that it is being added in an ad hoc fashion by market practitioners to their cost of equity calculations. Thus, although there is evidence of a positive and significant relationship between systematic risk and return, the results for country risk demonstrate that the Goldman Sachs Model was not a satisfactory explanation of expected returns in the Brazilian market in the past eleven years, leading us to question the validity of its application in practice. By adding a size premium factor to the model, there is evidence of a negative and significant relationship between companies’ size and return, although country risk remains not satisfactory to explain stock expected returns.
Date: 2017-03
Authors:
Guanais, Luiz Felipe Poli
Sanvicente, Antonio Zoratto
Sheng, Hsia Hua
A dynamic Nelson-Siegel model with forward-looking indicators for the yield c...FGV Brazil
This paper proposes a Factor-Augmented Dynamic Nelson-Siegel (FADNS) model to predict the yield curve in the US that relies on a large data set of weekly financial and macroeconomic variables. The FADNS model significantly improves interest rate forecasts relative to the extant models in the literature. For longer horizons, it beats autoregressive alternatives, with a reduction in mean absolute error of up to 40%. For shorter horizons, it offers a good challenge to autoregressive forecasting models, outperforming them for the 7- and 10-year yields. The out-of-sample analysis shows that the good performance comes mostly from the forward-looking nature of the variables we employ. Including them reduces the mean absolute error in 5 basis points on average with respect to models that reflect only past macroeconomic events.
Date: 2017-03
Authors:
Vieira, Fausto José Araújo
Chague, Fernando Daniel
Fernandes, Marcelo
Improving on daily measures of price discoveryFGV Brazil
We formulate a continuous-time price discovery model in which the price discovery measure varies (stochastically) at daily frequency. We estimate daily measures of price discovery using a kernel-based OLS estimator instead of running separate daily VECM regressions as standard in the literature. We show that our estimator is not only consistent, but also outperforms the standard daily VECM in finite samples. We illustrate our theoretical findings by studying the price discovery process of 10 actively traded stocks in the U.S. from 2007 to 2013.
Date: 2017-03
Authors:
Dias, Gustavo Fruet
Fernandes, Marcelo
Scherrer, Cristina Mabel
Disentangling the effect of private and public cash flows on firm valueFGV Brazil
This paper presents a simple model for dual-class stock shares, in which common shareholders receive both public and private cash flows (i.e. dividends and any private benefit of holding voting rights) and preferred shareholders only receive public cash flows (i.e. dividends). The dual-class premium is driven not only by the firm's ability to generate cash flows, but also by voting rights. We isolate these two effects in order to identify the role of voting rights on equity-holders' wealth. In particular, we employ a cointegrated VAR model to retrieve the impact of the voting rights value on cash flow rights. We finnd a negative relation between the value of the voting right and the preferred shareholders' wealth for Brazilian cross- listed firms. In addition, we examine the connection between the voting right value and market and firm specific risks.
Date: 2017-03
Authors:
Autor
Scherrer, Cristina Mabel
Fernandes, Marcelo
Dotcom bubble and underpricing: conjectures and evidenceFGV Brazil
We provide conjectures for what caused the price spiral and the high underpricing of the dotcom bubble of 1999–2000. We raise two conjectures for the price spiral. First, given the uncertainty about the growth opportunities generated by the new technologies and their spillover effects across technology industries, investors saw the inflow of a large number of high-growth firms as a sign of high growth rates for the market as a whole. Second, investors interpreted the wave of highly underpriced IPOs as an opportunity to obtain gains by investing in newly public companies. The underpricing resulted from the emergence a large cohort of firms racing for market leadership. Fundamentals pricing at the IPO was part of their strategy. We provide evidence for our conjectures. We show that returns on NASDAQ composite index are explained by the flow of high-growth (or highly underpriced) IPOs; the high underpricing can be fully explained by firms’ characteristics and strategic goals. We also show that, contrary to alternatives explanations, underpricing was not associated with top underwriting, there was no deterioration of issuers’ quality, and top underwriters and analysts became more selective.
Date: 2017-03
Authors:
Autor
Carvalho, Antonio Gledson de
Pinheiro, Roberto Benjamin
Sampaio, Joelson Oliveira
Contingent judicial deference: theory and application to usury lawsFGV Brazil
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1. Working
Paper 442
Mandatory IFRS Adoption in Brazil and Firm
Value
Joelson Oliveira Sampaio
Humberto Gallucci Netto
Vinícius Augusto Brunassi Silva
CEQEF - Nº29
Working Paper Series
06 de março de 2017
2. WORKING PAPER 442 – CEQEF Nº 29 • MARÇO DE 2017 • 1
Os artigos dos Textos para Discussão da Escola de Economia de São Paulo da Fundação Getulio
Vargas são de inteira responsabilidade dos autores e não refletem necessariamente a opinião da
FGV-EESP. É permitida a reprodução total ou parcial dos artigos, desde que creditada a fonte.
Escola de Economia de São Paulo da Fundação Getulio Vargas FGV-EESP
www.eesp.fgv.br
3. 1
Mandatory IFRS Adoption in Brazil and Firm Value
ABSTRACT
Using diff-in-diff approaches and the propensity-score matching, this study focuses on firm-level
Tobin´s q and Market-to-book outcomes for Brazilian firms who in 2008 were required by Law
11.638/07 to adopt the full International Financial Reporting Standards (IFRS) by 2010. Brazil’s
tier-system of corporate governance standards for publicly-traded firms, its uniquely wholesale
adoption of the IFRS, and the previously considerable gap between its national GAAP and IFRS
readily lend the scenario to research, which thus far finds small or inconsistent results when
focused on IFRS adoption-related outcomes in Europe and China. However, while these features
recommend the transitioned Brazilian equity market to analysis, additional unique features, such
as its small population size and its limited historical data -- of varied quality – increase the
challenge in selecting a suitable empirical methodology. Using quarterly data from 2006-2011,
control firms in the Nivel II and Novo Mercado tiers of Bovespa which already complied with
higher quality accounting standards are matched to treatment firms in the Regular and Nivel I
tiers with similar averaged values of size and sector. Our results suggest that there is a positive
impact on Tobin´s q and Market-to-book for firms who are forced to adopt IFRS in Brazil. We
can observe the same results when we consider all variables winsorized at 5% level. We also find
a positive relation between the firm value (measured by Tobin´s q and Market-to-book) and net
income. Firms with higher net income are more likely to have higher Tobin´s q and Market-to-
book. In an opposite way, we find a negative relation among firm value, size, Ebit-to-sales, sales
growth and PPE-to-sales. All results are statistically significant at 1% level.
Keywords: IFRS, Corporate Governance and Firm Value.
Corresponding author.
E-mail adresses: * joelson.sampaio@fgv.br; ** humberto.gallucci@ufba.br; ***
: vinicius.brunassi@fecap.br
Joelson Oliveira Sampaio
Fundação Getulio Vargas - EESP
Fundação Escola de Comércio Alvares Penteado
Humberto Gallucci Netto**
Universidade Federal da Bahia
Vinícius Augusto Brunassi Silva***
Fundação Escola de Comércio Alvares Penteado
4. 2
I. Introduction
This paper presents empirical evidence regarding the firm-level effects on the introduction of
mandatory IFRS reporting in Brazil. While a number of studies have focused on the economic
consequences of firms’ increased financial disclosure in general – and recently, informational
outcomes of the European Union’s 2005 adoption of IFRS specifically has become a popular
area of inquiry – there are reasons why results obtained to date might not adequately capture the
potential benefits of accounting standard convergence. First, the majority of existing literature
estimates effects in countries where the information environment is already considerably rich,
thus the effects of a marginal change in accounting quality may be difficult to identify with
sufficient statistical significance. Secondly, studies of effects in the European Union should
account for the specific terms of Regulation EC 1606/2002, which requires pre-approval by the
European Commission for any changes in reporting standards to become mandatorily
enforceable.
This has resulted in a somewhat piecemeal adoption of the IFRS (KPMG, 2008);
therefore, changes in European firms’ financial disclosure environment post-2005 capture less
precisely the effects of adopting the IFRS as intended by the IASB inasmuch as a general
convergence in accounting requirements. While preliminary research indicates that the quality of
Brazilian firm compliance suffers from marked heterogeneity (Santos et al., 2010), the general
consensus among foreign investment advisory statements and the IFRS Foundation has been to
consider Brazil a case of uniquely high-level, full adoption and conformance.
Because national Generally Accepted Accounting Principles (GAAP) can vary
substantially from each other, the subsequent lack of comparability in accounting statements
across countries introduces an information asymmetry in the international market for equity.
Economic theory suggests that this asymmetry can lead to several capital market inefficiencies
including adverse selection (Leuz and Verrecchia, 2000; and Leuz, 2003), increased cost of
capital (Baiman and Verrecchia, 1996), and substantial home bias in portfolio holdings (DeFond
et al. 2011; Yu and Wahid, 2014). To address these and other potential market inefficiencies, the
International Accounting Standards Board (IASB) and the Financial Accounting Standards
Board (FASB) have advocated global adoption of a uniform set of accounting standards, namely
5. 3
the former International Accounting Standards (IAS) whose current iteration is the ubiquitous
International Foreign Reporting Standard (IFRS).
The purpose of this paper is to address the efficacy of such uniform standard adoption in
reducing information asymmetry. We analyze efficacy by studying the reduction of value
discrepancy among Brazilian listed companies under different corporate governance
requirements before Brazil’s IFRS adoption. In 2000, the Sao Paulo Stock Exchange created
three high-governance listings (Level I, Level II and Novo Mercado – the highest) in order to
improve governance patterns. Thus, we study the effect of IFRS adoption in a market ruled by
firms adopting different governance patters and providing different level of information to
investors.
This paper enriches the scope of the current literature in the following respects: 1) it is
one of only a few papers focused on IFRS adoption in an emerging economy, 2) its focus is more
generally aimed at financial outcomes than accounting ones, 3) it calls attention to the
identification strategy in order to evaluate the impact of IFRS adoption on firm value. Hence, it
analyses the impact on value taking the adoption of IFRS and different governance patters into
account.
Using a propensity-score matching, this study focuses on firm value outcomes for
Brazilian firms who in 2008 were required by Law 11.638/07 to adopt the full International
Financial Reporting Standards (IFRS) by 2010. While Brazil’s tier-system of corporate
governance standards for publicly-traded firms, its uniquely wholesale adoption of the IFRS, and
the previously considerable gap between its national GAAP and IFRS readily lend the scenario
to research, Bovespa’s small population size and its firms’ limited historical data (of
heterogeneous quality) increase the challenge in selecting a suitable empirical methodology.
Using quarterly data from 2004 to 2015, non-treated firms in the Level II (N2) and Novo
Mercado(NM) tiers of Bovespa which already complied with higher quality accounting standards
are matched to treatment firms in the Regular (Reg) and Level I (N1) tiers with similar averaged
values of size in the same industry.
Our results suggest that there is a positive impact on Tobin´s q and Market-to-book for
firms who are forced to adopt IFRS in Brazil. We can observe the same results when we consider
all variables winsorized at 5% level. We also find a positive relation between the firm value
(measured by Tobin´s q and Market-to-book) and net income. Firms with higher net income are
6. 4
more likely to have higher Tobin´s q and Market-to-book In an opposite way, we find a
negative relation among firm value, size, Ebit-to-sales, sales growth and PPE-to-sales. All results
are statistically significant at 1% level.
The structure of this paper proceeds as follows. The second section discusses the related
literature and provides information regarding the types of governance listings in Brazil. The third
section shows a description of our data and the fourth section presents our identification strategy.
The fifth section provides our empirical results and conclusions.
II. Relevant Literature
This study relates most closely to the ‘association-based’ studies in the financial literature on
disclosure, which generally attempt to document the effects on trading volume, cost of capital
and value of the reduced information asymmetry (Kanodia, 2006). Both previous theoretical and
empirical work suggest that a negative relationship exists between information asymmetry and
trade volume (Admati and Pfleiderer, 1988). For example, Leuz and Verrecchia (2001) consider
voluntary commitment to increased disclosure levels in Germany and finds that for firms who
switch from German GAAP to IAS or US GAAP, trade volume increases. They conclude that
this suggests disclosure lowers the information asymmetry component of the cost of capital.
Cofee (1984), Dye (1990) and Lambert, Leuz and Verrecchia (2007) specify that
investors can better compare companies around the world due to IFRS reporting. Daske, Hail,
Leuz and Verdi (2008) evaluate the economic consequences of mandatory IFRS around the
world. They show that market liquidity, equity valuation and the cost of capital improved after
the IFRS (market liquidity and equity valuation increased while the cost of capital decreased).
According to Verrecchia (2001) and Lambert, Leuz and Verrecchia (2007) higher quality
financial reporting and better disclosure help to mitigate adverse selection problems.
Moreover, Botosan and Plumlee (2002) argue that the firm implied cost of capital is
negatively related to better governance patters. In a nutshell, IFRS adoption has a positive effect
on information quality. However, the positive effects depend on country’s features and
companies’ attributes. Jeanjean and Stolowy (2008) point out that IFRS provide necessary but no
sufficient condition for creating a common business language. In addition, some papers
highlighting reporting incentives question the consequences of better reporting policies, Ball,
Kothari and Robin, (2000), Ball, Robin and Wu (2003) and Daske et al (2008). The effective
7. 5
implementation of IFRS in firm’s report also plays an important role (Ball, 2006; Armstrong,
Barth, & Riedl, 2010).
Dask et al. (2008) show that cost of capital and Tobin’s q are affected by the change in
accounting rules. However, they did not measure the IFRS’ effects in Brazil due to the period of
analysis. Santos, Ponte and Mapurunga (2014) present low levels of compliance after the first
year of mandatory IFRS’ adoption in Brazil and point out that institutional support conditions
must be improved. Lourenço and Branco (2015) study the existing literature regarding the
consequences of IFRS’ adoption. They conclude that IFRS adoption has a positive effect on
capital markets and information use. On the other hand, enforcement must be improved
(country’s characteristics) in order to reach out better results.
Verriest et al. (2012) show that within a mandatory increased disclosure setting,
compliance is associated with previous marks of higher quality governance. Our paper differs
from this in that we examine the effects of a case in which the increase in disclosure is
mandatory, and uniformly applied across all firms. Alencar (2005) looks at voluntary
commitment to increased disclosure in Brazil and finds that it does not alter the cost of capital
for firms in Brazil.
We study the effects of lower information asymmetry on firm value. What we look at
here is a mandatory change by everyone as opposed to a voluntary change by some. Something
about theoretical underpinnings leading to different expectations because now there is no
‘optimal disclosure’, there is a different kind of public goods story. Our expectation is that
everyone benefits from an improved information environment only if there was a ‘reverse
tragedy of the commons’ going on.
This paper exploits the specific distinction between the tiers’ accounting standard
requirements in Brazil. We expect that firm value and firm’s reporting quality are positively
related.
BM&F Bovespa1
is Brazil’s leading stock exchange, currently listing 365 firms. It is
organized as of 2000 into four tiers of corporate governance quality. Each tier, from Regular
(Reg), Level I (L1), Level II (L2), to Novo Mercado (NM) corresponds to increasingly higher
standards of corporate governance and shareholder rights protection requirements; members
must adhere or be subject to penalties and enforcements by the Brazilian equivalent of the
1
Sao Paulo Stock exchange, www.bmfbovespa.com.
8. 6
Securities Exchange Commission, the Comissão de Valores Mobiliários (CVM). All firms with
Level 2 and Novo Mercado status were already required to use IAS/IFRS since 2000, while
Level 1 and Regular firms were allowed to use Brazilian GAAP. Therefore, when Regulation
11.638/07 was voted into law and required all publicly traded firms to adopt IFRS, this only
required a change in reporting practices for Level 1 and Regular firms.
III. Data
We have collected data from 595 Brazilian firms from 2004 to 2015. We capture all financial
and company information from Economatica2
. Table 1 provides a brief description of our
variables.
[Table 1]
Each company in our sample belongs to one of the corporate governance tiers (Regular,
Level I, Level II and Novo Mercado). Novo Mercado presents the highest standards of corporate
governance. Companies listed in Level II maintain most of the Novo Mercado requirements. The
main difference is that Level II allows non-voting shares. Level I provides improved disclosure
standards while the Regular Level has no corporate governance requirement beyond the ordinary
one required by law. The numbers in tables 2 and 3 allow us to adopt median comparison tests
that compare Tobin’s q, market to book, assets, leverage, Net Income/assets, sales, EBIT/sales,
growth and PPE/sales for our corporate governance tiers. Regular and Level I firms present
extensive use of non-voting shares and low levels of disclosure. Hence, we grouped Regular and
Level I firms as treated and Level II and Novo Mercado as non-treated.
[Table 2]
[Table 3]
2
www.economatica.com
9. 7
Several filters were applied to the original database. First, we take stable corporate
governance into account. Hence, we cut companies that did not maintain the same tier for the
entire period. Second, we drop all over-the-counter listed companies and do not consider
companies listed in “Bovespa Mais” (similar to Novo Mercado, but usually for smaller firms and
with some restrictions, e.g., there is no need for 25% free float) and BDRs (Brazilian Depositary
Receipts). Third, we drop all firms with any change in its ADR status. Fourth, we do not include
firms facing negative equity value in any period of our sample. In the last filter we excluded all
financial firms. The final panel data collected was given in quarterly format starting with the first
quarter of 2006 and ending in the fourth quarter of 2012. We have 50 treated and 40 non-treated
companies. The mandatory adoption of full IFRS in Brazil, after a transition starting in 2008,
was effective in 2010. This paper consider data before 2008 and after 2010 in order to avoid
problem related to transition period.
IV. Identification Strategy
This paper exploits the specific distinction between the tiers’ accounting standard requirements:
firms with N2 and NM status were already required to use IAS/IFRS since 2000, while N1 and
Reg firms were allowed to use Brazilian GAAP. Therefore when Regulation 11.638/07 was
voted into law and required all publicly traded firms to adopt IFRS, this only required a change
in reporting practices for N1 and Reg firms.
While this difference clearly identifies a treatment (Reg and N1 firms) and non-treated
(N2 and NM) group, group assignment is decidedly nonrandom. Selection into tiers was
originally chosen by the firms themselves, and a preliminary examination of descriptive statistics
(see table 2 and table 3) indicates that there are significant differences between the treatment and
control group across variables known to correlate with Ebit-to-sales, sales growth and PPE-to-
sales. In order to minimize this problem we adopted the propensity score matching approach for
this study.
To better identify the treatment effect of IFRS adoption, treated firms – Reg and N1 firms
who adopted IFRS by 2010 – were matched with non-treated firms of similar average size and
sector. We use mandatory IFRS’ adoption (required by Law 11.638/07) as an exogenous shock
in order to measure firm’s value. First, we separate all firms in the sample following each
10. 8
corporate governance tier. Selection into tiers was originally chosen by the firms themselves. It
clearly identifies a treatment (Regular and Level 1 firms) and non-treatment (Level 2 and Novo
Mercado) group, hence, group assignment is decidedly nonrandom and one can find significant
differences between the treatment and non-treated group across variables.
We use the following specification:
𝑇𝑜𝑏𝑖𝑛𝑠´𝑞𝑖,𝑡 = 𝛼(𝐼𝐹𝑅𝑆𝑖,𝑡 𝑇𝑖,𝑡) + Γ0 𝑇𝑖,𝑡 + Γ1 𝐼𝐹𝑅𝑆𝑖,𝑡 + 𝛽′
𝑋𝑖,𝑡 + 𝜀𝑖,𝑡 (1)
Where:
𝐼𝐹𝑅𝑆𝑖,𝑡 is a dummy variable for firms that adopted IFRS prior to X;
𝑇𝑖,𝑡 is a dummy variable of time;
𝑋𝑖,𝑡 is a matrix of control variables;
V. Results
Tables 2 and 3 show a considerable bias prior to the matching. This allows us to proceed to
estimating of the average treatment effect on the treated – the average changes in Tobin´s q and
Market-to-book of firms in the post-IFRS adoption period 2010 to 2014 (quarter 1). We follow
this procedure because post match, all differences between treated and non-treated firms across
these variables is no longer statistically significant.
The main variable of interest is the parameter α, which accounts for the differential
impact from IFRS adoption for voluntary and mandatory adopters. The results (see table 4)
suggest that there is a positive impact on Tobin´s q for firms who are forced to adopt IFRS. This
result confirms the hypothesis that if a firm adopts IFRS as part of a commitment to increase
transparency and disclosure, the impact of such adoption on the firm value could be more
pronounced than for firms who did not adopt it (Daske et al. 2011). We can observe the same
result with Market-to-book variable. All results are statistically significant at 1% level.
The underlying idea for this result is that reporting incentives play a significant role for
firms’ reporting strategies as well as the need to adopt IFRS. Based on this logic, we attempt to
11. 9
identify firms that experience substantial increases in their reporting incentives due to IFRS
adoption. These firms are likely to make major improvements to their reporting strategy. (Daske
et al. 2008).
Table 5 shows the same estimation, but considering all variables winsorized at 5% level.
We can observe the same results, but there is a difference in terms of magnitudes of the
coefficients. All results are controlled for industry fixed effects and quarter dummies. Figures 1
to 4 show the route of Tobin's q and Market-to-book for the period of analysis.
[Figure 1]
[Figure 2]
[Figure 3]
[Figure 4]
In addition, we find a positive relation between firm value (measured by Tobin´s q and Market-
to-book) and net income. Firms with higher net income are more likely to have higher Tobin´s q
and Market-to-book. In an opposite way, we find a negative relation among firm value, size,
Ebit-to-sales, sales growth and PPE-to-sales. All results are statistically significant at 1% level.
[Table 4]
[Table 5]
VI. Conclusion
In this paper, we examine how the adoption of International Financial Reporting Standards
reporting in Brazil affects the firm value in terms of Tobin´s q and Market-to-book. The potential
12. 10
benefits from IFRS adoption (e.g. increased transparency and comparability of financial
statement information across countries) would suggest that the adoption of IFRS could lead to an
improvement in the information environment that would have a positive impact on firm value.
On the other hand, the implementation of IFRS is likely to be inconsistent across firms, and even
more so across nations, which may lead to a reduction in the comparability of the resulting
financial statement information. As such, IFRS may not have any impact, or potentially an
adverse impact on firm value.
Our results are in line with the hypothesis that if a firm adopts IFRS as part of a commitment to
increased transparency and disclosure, the impact of such adoption on firm value could be more
pronounced than for firms who did not adopt it. The results suggest that there is a positive impact
on Tobin´s q and Market-to-book for firms who are forced to adopt IFRS in Brazil. We can
observe the same results when we consider all variables winsorized at 5% level.
Finally, we also find a positive relation between the firm value (measured by Tobin´s q and
Market-to-book) and net income. Firms with higher net income are more likely to have higher
Tobin´s q and Market-to-book. In an opposite way, we find a negative relation among firm
value, size, Ebit-to-sales, sales growth and PPE-to-sales. All results are statistically significant at
1% level.
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16. 14
Table 1
Variables Definition
Tobin’s q
(book value of debt + market value of common stock)/ book
value of assets
Market-to-book market value of shares / book value of assets
ln (assets) natural logarithm of book value of assets
Leverage (Total liabilities)/total book value of assets.
Net Income/assets Ratio of net income over assets
EBIT/sales Earnings before interest and tax (EBIT)/total sales
One year sales
growth
Geometric average sales growth during past three years (or
available period if less)
PPE/sales Ratio of property, plant, and equipment (PPE) to sales
industry dummies Two digit NAICS sectors.
17. 15
Table 2
Median Comparison
Medians and means for treated and non-treated firms in the last quarter of 2007.
Tobin’s
Q
Market-
to-book
ln (assets) Leverage
Net
Income/
Assets
EBIT/
Sales
PPE/
Sales
Panel A: Medians for Treated and Non-Treated Firms in 2007
Treated 1.26 1.03 14.79 0.53 0.08 0.17 0.52
Non-Treated 1.63 1.55 14.30 0.49 0.06 0.14 0.33
Difference -0.37 -0.52 0.49 0.04 0.02 0.03 0.19
Median Test
p-value
0.02 0.02 0.13 0.70 0.25 0.25 0.06
Panel B: Medians for Treated and Control Firms in 2007
Treated 1.26 1.03 14.69 0.53 0.08 0.17 0.52
Control 1.63 1.55 14.30 0.49 0.06 0.14 0.33
Difference -0.37 -0.52 0.39 0.04 0.02 0.03 0.19
Median Test
p-value
0.02 0.02 0.44 0.70 0.24 0.44 0.24
18. 16
Table 3
Mean Comparison
Medians and means for treated and non-treated firms in the last quarter of 2007.
Tobin’s Q
Market-
to-book
ln (assets) Leverage
Net
Income
/Assets
EBIT/
Sales
PPE/ sales
Panel A: Means for Treated and Non-Treated Firms in 2007
Treated 1.50 1.32 14.76 0.51 0.08 0.19 0.71
Non-Treated 1.90 1.74 14.45 0.50 0.06 0.17 0.75
Difference -0.41 -0.42 0.31 0.01 0.01 0.02 -0.04
Mean Test p-
value
0.02 0.03 0.31 0.76 0.28 0.54 0.79
Panel B: Means for Treated and Control Firms in 2007
Treated 1.54 1.35 14.49 0.51 0.08 0.18 0.64
Control 1.91 1.75 14.45 0.50 0.06 0.17 0.73
Difference -0.37 -0.41 0.04 0.01 0.01 0.02 -0.09
Mean Test p-
value
0.02 0.04 0.89 0.86 0.29 0.62 0.56
19. 17
Table 4
Medians and means for treated and non-treated firms in the last quarter of 2007.
25th % Median 75th %
Kolgomorov-Smirnov
Test p-value
Tobin’s Q
Treated 0.90 1.26 1.77
0.04
Control 1.19 1.63 2.36
Market-to-
book
Treated 0.69 1.03 1.59
0.03
Control 0.99 1.55 2.12
ln (assets)
Treated 13.13 14.69 15.81
0.47
Control 13.61 14.30 15.48
Leverage
Treated 0.41 0.53 0.64
0.76
Control 0.40 0.49 0.64
Net Income
/Assets
Treated 0.03 0.08 0.12
0.27
Control 0.03 0.06 0.09
EBIT/ Sales
Treated 0.05 0.16 0.27
0.60
Control 0.07 0.14 0.27
PPE/ sales
Treated 0.22 0.52 0.84
0.06
Control 0.10 0.33 0.84
20. 18
Table 5
Difference by variable between the average of variables in 2010 and the average of variables at 2010.
25th % Median 75th % Mean
Tobins’ Q
Treated -21.4% -25.2% -18.5% -23.7%
Control -39.6% -40.3% -36.8% -32.9%
Difference 18.2% 15.1% 18.3% 9.2%
Market-to-
book
Treated -29.1% -23.6% -20.9% -26.6%
Control -47.6% -50.8% -38.2% -38.3%
Difference 18.5% 27.2% 17.3% 11.7%
ln (assets)
Treated 1.1% 2.0% 3.2% 2.1%
Control 5.6% 4.1% 5.1% 4.6%
Difference -4.4% -2.1% -1.9% -2.6%
Leverage
Treated -2.9% 3.6% -3.1% 1.4%
Control 28.1% 18.9% 1.4% 12.8%
Difference -31.1% -15.3% -4.5% -11.4%
Net Income
/Assets
Treated -0.7% -22.1% -12.1% -11.7%
Control 51.2% 9.3% -3.2% 3.5%
Difference -51.9% -31.3% -8.9% -15.3%
EBIT/ Sales
Treated 115.9% -17.3% -18.9% -8.2%
Control 39.4% 18.7% -17.6% 10.8%
Difference 76.5% -36.0% -1.3% -18.9%
PPE/ sales
Treated -37.9% -13.0% -5.8% -3.1%
Control -68.3% -60.1% -45.9% -44.1%
Difference 30.4% 47.1% 40.0% 41.0%
21. 19
Table 4
Results
This Table presents treatment effect of IFRS adoption. Dependent variables are Tobin’s q: (book value
of debt + market value of common stock)/ book value of assets; Market-to-book: market value of
shares / book value of assets. Independent variables are Treatment: dummy variable that is equal to one
if a firm is in Regular or Level I governance tier and after the period is after 2010; Treated: dummy
variable that is equal to one if a firm is in Regular or Level I governance tier; After 2010 dummy is
equal to one if the quarter is after 2010; ln (assets): natural logarithm of book value of assets;
Leverage: (Total liabilities)/total book value of assets.; Net Income/assets: Ratio of net income over
assets; EBIT/sales: Earnings before interest and tax (EBIT)/total sales; One year sales growth:
Geometric average sales growth during past three years (or available period if less); PPE/sales: Ratio
of property, plant, and equipment (PPE) to sales. T-values are given in brackets.
Tobin’s q Tobin’s q
Market-to-
book
Market-to-
book
Treatment
0.788*** 0.495*** 0.738*** 0.478***
(3.79) (5.24) (3.55) (5.12)
Treated
-1.002*** -0.597*** -0.998*** -0.597***
(-5.04) (-6.90) (-5.00) (-7.00)
After 2010
dummy
-0.821*** -0.436*** -0.811*** -0.415***
(-4.14) (-6.32) (-4.07) (-5.98)
ln (assets) -0.109*** -0.102***
(-3.64) (-3.52)
Leverage
0.233 -0.024
(1.29) (-0.14)
Net
Income/assets
7.366*** 7.870***
(8.81) (9.66)
EBIT/sales
-0.152*** -0.155***
(-3.50) (-3.51)
One year sales
growth
-0.006*** -0.006***
(-3.07) (-3.37)
PPE/sales
-0.099*** -0.072***
(-3.47) (-2.74)
Industry
dummies
yes Yes
Quarter
Observations 2,238 2,098 2,238 2,098
Adjusted-R2
0.04 0.38 0.04 0.41
The symbols ***, ** and * denote significance at the 1% level, 5% level and 10% level, respectively.
22. 20
Table 5
Winsorized Results
This Table presents treatment effect of IFRS adoption using 5% winsorization for all variables.
Dependent variables are Tobin’s q: (book value of debt + market value of common stock)/ book value
of assets; Market-to-book: market value of shares / book value of assets. Independent variables are
Treatment: dummy variable that is equal to one if a firm is in Regular or Level I governance tier and
after the period is after 2010; Treated: dummy variable that is equal to one if a firm is in Regular or
Level I governance tier; After 2010 dummy is equal to one if the quarter is after 2010; ln (assets):
natural logarithm of book value of assets; Leverage: (Total liabilities)/total book value of assets.; Net
Income/assets: Ratio of net income over assets; EBIT/sales: Earnings before interest and tax
(EBIT)/total sales; One year sales growth: Geometric average sales growth during past three years (or
available period if less); PPE/sales: Ratio of property, plant, and equipment (PPE) to sales. T-values
are given in brackets.
Tobin’s q Tobin’s q
Market-to-
book
Market-to-
book
Treatment 0.571*** 0.435*** 0.524*** 0.407***
(5.12) (5.34) (4.65) (5.01)
Treated
-0.827*** -0.605*** -0.815*** -0.586***
(-8.16) (-7.64) (-7.98) (-7.46)
After 2010
dummy
-0.653*** -0.507*** -0.632*** -0.472***
(-6.38) (-7.36) (-6.08) (-6.83)
ln (assets)
-0.068*** -0.056**
(-3.01) (-2.56)
Leverage
0.158 -0.116
(1.08) (-0.81)
Net
Income/assets
6.635*** 7.072***
(9.90) (10.72)
EBIT/sales
0.001 -0.001
(0.26) (-0.24)
One year sales
growth
-0.004** -0.003**
(-2.40) (-2.23)
PPE/sales
-0.067** -0.043*
(-2.48) (-1.77)
Industry
dummies
yes Yes
Observations 2,238 2,098 2,238 2,098
Adjusted-R2
0.04 0.39 0.04 0.42
The symbols ***, ** and * denote significance at the 1% level, 5% level and 10% level, respectively.
23. 21
Figure 1
Median Tobin’s q
Quarter median for each group. Treated are firms in the Regular and Level 1 governance
tiers; Non-treated are firms in the Level 2 and Novo Mercado governance tiers.
24. 22
Figure 2
Mean Tobins’q
Quarter median for each group. Tobin’s q is winsorized at 5% level. Treated are firms in
the Regular and Level 1 governance tiers; Non-treated are firms in the Level 2 and Novo
Mercado governance tiers.
25. 23
Figure 3
Median Market to book
Quarter median for each group.Treated are firms in the Regular and Level 1 governance
tiers; Non-treated are firms in the Level 2 and Novo Mercado governance tiers.
26. 24
Figure 4
Mean Market to book
Quarter median for each group. Market to book is winsorized at 5% level. Treated are
firms in the Regular and Level 1 governance tiers; Non-treated are firms in the Level 2
and Novo Mercado governance tiers.