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The Effect of IFRS Convergence on

Value Relevance of Accounting Information:
Cross-Country Analysis of Indonesia, Malaysia, and Singapore
Ayu Maharani
Sylvia Veronica Siregar
Universitas Indonesia
Abstract
This study aims to analyze the impact of IFRS convergence on the
value relevance of accounting information for listed companies in Indonesia,
Malaysia, and Singapore during the period towards full convergence of
IFRS (year 2007-2011). This study tested two matters. First, whether the
overall reported accounting information during the period towards full
convergence of IFRS is value relevant for those companies and second,
whether the value relevance of accounting information for them have
increased during the period towards full convergence of IFRS using
analytical methods cross-section data of level models. Results of this study
indicate that the overall accounting information reported during the period
towards full convergence of IFRS is value relevant for listed companies in
Indonesia, Malaysia, and Singapore. However, the value relevance of
accounting information of those companies are not increase during the
period towards full convergence of IFRS.
Keywords: IFRS convergence; value relevance of accounting information;
cross-country analysis.

Introduction
The financial statements are a source of information on the performance and
financial position of an enterprise that is useful for users as a basis for decision making.
A financial statement should represent relevant and reliable information to be useful.
The quality of financial statements is affected by the quality of accounting standards.
Globalization, international trade development, as well as the progress of the
international capital market require the availability of information that is comparable
across countries to use the same basis. In today's global economy, the need for high
quality and comparability of financial information increases (Jones, 2005). A qualified
generally accepted accounting standards is needed to ensure comparability across
countries (Kieso et al., 2011). It also makes the harmonization of financial statements is
more effective, in term informative as well as efficient or easy to understand for users
and cost-effective for preparers (Choi & Meek, 2011; Doupnik & Perera, 2009). The
implication of this is the need for the application of a set of high quality accounting
standards globally so as to produce quality financial statements for users in various
countries. IFRS (International Financial Reporting Standards) is considered as a
standard that could encourage more qualified presentation of financial statements
(Imhoff, 2003; Penman, 2003).
This study analyzes the effect of IFRS convergence on the value relevance of
accounting information of listed companies in Indonesia, Malaysia, and Singapore
during the period towards full convergence of IFRS (2007-2011). This research is
motivated by the importance of value relevance of accounting information as a
reflection of the financial statements quality. Barth et al. (2005), Barth et al. (2001),
Ball et al. (2000), and Ohlson (1995) show that the greater of value relevance, then the
greater quality of information that is meant to reduce investors’ reliance on information
other than financial statements .
Related dimensions of value relevance, the application of IFRS are considered
able to contribute positively in the era of global competence development in the form of
more relevant and comparable presentation of accounting information. Tenaya (2008)
states that the concept of fair value raised by IFRS are considered able to produce more
relevant information compared to the financial statements of historical cost (historical
cost) which has the disadvantage of not able to predict the company's ability to take
advantage of opportunities and react in adverse situations.

but does not have an impact on unconsolidated counterparts. to strengthening the explanation. and Singapore were used because all of them reached full IFRS convergence in 2012. the decomposition is done on the net income components. While testing with pricing model demonstrates that the value relevance fluctuates since the adoption of IFRS. This study proves that the implementation of IFRS encourages accounting measures that have more value relevance. Previous Research and Hypotheses Development Literatures and existing studies conclude that the relevance value has a close connection with the adoption of IFRS or convergence.In addition. However. Karampinis and Hevas (2009) conducted a study on the impact of IFRS adoption on the value relevance of Greece in the span of a two year period before and after IFRS adoption (2003-2006) to analyze the increase in the value of . the study of the relevance and value in the scope of the ASEAN countries that use the method of gradual convergence of IFRS is still relatively not much. Malaysia. This study concludes that IFRS adoption positively affect the value relevance of consolidated net income and book value. this study also based on the existence of interest to review the accounting policies. . In addition. In this study. given the rapid development as a potential market and discourse formation of AEC (ASEAN Economic Community) in 2015 which encourage the creation of regulatory alignment. and Singapore. the scope of Indonesia. This study aims to analyze whether the accounting information reported during the period towards full convergence of IFRS has relevance value to the listed companies in Indonesia. From the previous research. Iatridis (2010) conducted research on companies listed on the London Stock Exchange in 2004 using the base price and return models. This study also show that there is a positive and significant relationship between the book value equity and net income to the market value of the company. as well as assessing the restatement information from local GAAP to IFRS. Alali and Foote research (2012) shows that there is a significant increase in the value relevance of public listed companies in Abu Dhabi Stock Exchange since the beginning period of the adoption of IFRS in 2000. Malaysia. as well as whether the value relevance of accounting information of these companies are increase over the period towards full convergence of IFRS (year 2007-2011). particularly in the ASEAN region. this increase was only seen with the use of return model on 2000-2004.

and economic. Liu and Liu (2007) and Alali and Foote (2012) demonstrate empirically that the overall financial statements reported under IFRS have value relevance. As a result. and Singapore are three ASEAN member countries which have full convergence plan in 2012 with a gradual method (PwC. Regardless of differences in political. namely. Tsalavoutas (2012) conducted a study on the impact of IFRS adoption on the value relevance of Greece in 2005 by using the data before (with local GAAP) and after restatement (IFRS). social. However. and Singapore. and Thailand have a tendency for not reporting timely as well as managers and auditors in these countries did not have an incentive to improve the quality of financial reporting. the coefficient on net income decreased after IFRS adoption. Malaysia. which is based on Saudagaran and Diga (1998) report no increase in quality of accounting reporting practices. Instead of that. From previous research related to the relevance of the information reported under IFRS and financial reporting conditions in Indonesia. legal. Malaysia. Accounting information derived from company financial statements are public resources that can be used by investors as a basis for any decision or economic action. 2011). legal. ( 2003) find that four common law countries in East Asia. Hung and Subramanyam (2007) prove that the value relevance of book value and earnings under IFRS proved not significantly different than that reported under German GAAP for the year 1998-2002. Rodrigues. and Craig (2010) conducted a study of companies in Portugal during the years 1998 to 2008 and the results show that there is a decline on the value relevance of earnings since the implementation of IFRS. Malaysia . Ball et al. social. and economic background. While Indonesia is the country that previously adopted the Anglo-North American accounting regulations. Hong Kong. and Singapore still have the same problem. Malaysia. But from a financial reporting standpoint. These countries basically have different background of political. there are no significant changes in the value relevance of accounting information in the period before and after IFRS adoption. the coefficient on book value equity increased significantly after IFRS adoption. previous studies show that essentially financial reporting practices in Indonesia. Oliveira. these three countries are relatively similar to the movement toward IFRS convergence. Indonesia. it is estimated that overall accounting information reported during the the years 2007- .Singapore.Not all studies show a positive relationship between IFRS adoption and the value relevance of accounting information.

equity. and corporate expenses. and Singapore are increase during the period towards full convergence of IFRS (2007-2011). Malaysia. From the reaction of the stock market. and comparable and produce more valid information related to assets. then this study would expect an increase in the value relevance of accounting information during the period towards full convergence of IFRS (2007-2011). the company's financial statements will provide more relevant and accurate information. this study expects that the overall accounting information reported during the period towards full IFRS convergence in these three countries have a value relevance. with the increasing level of IFRS convergence from year to year. In addition. higher value relevance. Petreski (2005) shows that by adopting the international standards. (2008) who find that after the introduction of IFRS.2011. From previous studies and the explanation. Malaysia. then the investor and the market will be relatively stable and familiar with the information reported under IFRS. income. The first hypothesis to be tested in this study are : H1: Overall accounting information reported during the period towards full convergence of IFRS is value relevant for listed companies in Indonesia. financial statements quality generally increased through lower levels of earnings management. in which the IFRS based standards effectively enforced gradually. and more timely recognition of losses. liabilities. . (2007) find that the stock market reaction is significantly affected by the adoption of IFRS. the management will have a higher level of accountability in managing the company. referring to Liu and Liu (2007) and Alali and Foote (2012). accounting information is expected becoming a major basis in making economic decisions. Therefore. and Singapore. Armstrong et al. Thus. Similar findings were reported by Barth et al. will be relevant. The second hypothesis to be tested in this study are: H2: The value relevance of accounting information of listed companies in Indonesia.

three months after the end of the financial period under study for Indonesia (Bapepam-LK Regulation No. 2012). To avoid problem of currency differences between countries that used as samples. the market value of company i two months after the end of the financial period under study for Singapore (SGX Rulebooks Section 705). Level model is used as the main model because previous studies demonstrate that the price model can provide a relatively stable measurement of a value compared to the market price (Damodaran.2) and Malaysia (Bursa Malaysia Regulation Rule 1201. 2012. called the price model or level model. Cahan. this is more in line with the focus of the IFRS related to the use of fair value that more value relevance to explain the price through components of net assets. value at the end of The main model that used for cross-country analysis is as follows: = + + + + : The market value of company i at the time of financial statements publishing requirement for each country. 1999). Price model that used based on the framework measures the value relevance through linkages between the company’s market value by splitting the information component of book value equity and profit. 2009). X.Research Methods The main model that used in this study is the research model refers to Tsalavoutas et al. divided by the market value of equity at the end of : the book value equity for company i at the end of the financial period (t) divided by the market value of equity at the end of : Net income divided by the market value of equity at the end of Log : Logarithm control variable in term level of convergence index of a country's local GAAP to IFRS as international accounting standards (logarithm of the average value of the index) . or book value equity (Godfrey et al.K.1). 2010). (2012) which is rooted from the theoretical foundation by Ohlson (1995) to measure the value relevance. and can cope with the gap between accounting reporting and economic events through book value equity variable to reflect the cumulative effects of the return that can not be represented by earnings (Easton. then the alternative deflator is used. which is the equity market (Tsalavoutas..

Convergence level of local GAAP to IFRS variable measures the level of adoption of local accounting standards of a country compared to international accounting standards. Standards that used as a basis for measuring the convergence level of a country in this study are: (1) Financial Statements of Presentantion. (13) Consolidated Financial Statements and Accounting for Investment in Subsidiaries. and Changes in Accounting Policies. (16) Interim Financial Reporting. EY. (6) Segment Reporting. (17) Impairment of Assets. Plant. 2009): • Value 1 if it is stated that there is no accounting standard equivalent in local GAAP . (20) Financial Instrument. (3) Cash Flow Statement. (18) Intangible Assets. • Value 2 if it is explained about the differences between local GAAP and IFRS . To quantify these differences. (15) Earnings per Share. (10) The Effect of Change in Foreign Exchange Rate/Foreign Currency Translation. Measurement of IFRS convergence level which is used in this study adopt research methods used by Wardhani (2009). and Equipment. In measuring the level of convergence. scale of 1 to 4 is used with the criteria stated in the report on the similarities and differences between local GAAP of a country with IFRS as issued by the Big Four public accounting firms (Wardhani. (9) Employee Benefit. • Value 4 if it is stated that standards in local GAAP are similar with IFRS without any explanation of the difference between the local GAAP to IFRS .LogIFRS used as a control variable to control the different convergence level of IFRS among the countries. (5) Events After the Balance Sheet Date. (14) Accounting for Investments in Associates. and PwC). (8) Leases. (4) Net Profit or Loss for the Period. (7) Property. (11) Business Combination. (2) Inventories. 2009). Local accounting standard that compared to IFRS is twenty standards related disclosure requirements and restrictions which have significant influence based on the measurement method developed by Asbaugh and Pincus (2001). • Value 3 if it is stated that standards in local GAAP are similar with IFRS and also explained about some of the differences between the IFRS with local GAAP . . (19) Revenue Recognition. Fundamental Errors. KPMG. (12) Related Party Disclosures. Convergence level data of a country's local GAAP to IFRS obtained by measuring the difference between the local accounting standards of a country with IFRS (Wardhani. and. this study uses data about the similarities and differences between local GAAP of a country based on the applicable effective with IFRS as issued by the internationally scaled Big Four public accounting firms (Deloitte.

Third.The convergence level of IFRS that used in this research model is the logarithm of the average value scores for twenty standards which are used as a reference in each country for the years 2007-2011. the level model testing with the same companies as samples every year. Iatridis (2010) states that high quality earning is expected to have a close relationship with stock return. the use of price and return models can complement each other. The first sensitivity analysis aims to prove the consistency of the results and examine the possibility of fluctuations in the results arising from differences in the number of samples used across the years. Easton research (1999) also shows that the use of return model can overcome the scale problems that arise from level model. First. the cross-country level model will also be tested using the same sample of firms over the years 2007-2011. For testing purpose of the cross-section as a whole. The second sensitivity testing is used to check the explanatory power of and the coefficient result of OLS regression price model. the test with return model. 2012). This test eliminates LogIFRS as a control variable to control the convergence level of IFRS differences between countries. and the coefficient result of . These variables accommodate heterogenity across the years (Alali & Foote. the model used is as follows: = + + + + The main model test is used to examine the explanatory power of + and the coefficient result of OLS regression price model. then dummy control variables are used in 2008-2011 ( ). with 2007 as the base year. The first sensitivity testing is used to check the explanatory power of and the coefficient result of OLS regression price model. Logarithms used in this variable for normality of data distribution . Return model is used as a complementary analysis in this study to test the consistency of the main model results. Second. Five sensitivity analysis performed in this study. the analysis performed by using the level model that will be tested country by country basis. The test is used to check the return models explanatory power of OLS regression of profits on stock returns. The second sensitivity analysis is used to look for specific differences among countries. So for overall test. the level model testing with analysis by each country. In addition. According to Lev and Ohlson research (1982).

Selection sample method used in this study is purposive sampling with criteria: listed companies on the stock exchange in Indonesia. 623 in 2009 . The test is performed against the backdrop several previous studies prove that the use of the decomposition model can increase the explanatory power of accounting variables (Karampinis & Hevas. pension institutions. Decomposition model testing is used to determine the net income components that have statistically significant difference in representing the value relevance of accounting information through statistically coefficient value significance of decomposition price model. 673 in 2010. Fifth. level model testing with decomposition of net income components refers to Karampinis and Hevas research (2009). companies are not included in the financial (banking. 1997). and Singapore for the years 2007-2011. mortgage institutions. From those criteria. lending institutions. The cutoff point of the splitting used is the median of log total assets value for each country. This is because these industries have the different financial structure and regulation and also can not be equated with other industries. companies that have positive book value equity.Fourth. The value relevance is assessed through the ability of accounting information represents the market value or in other words how well the independent variables . etc. real estate. Czernkowski. It was performed using equation (1) and (2) the crosscountry main model (price model) with dividing the group sample into subsamples of the large and small companies. 2011). 2009. level model testing with splitting the samples by firm size refers to Alali and Foote research (2012). company that has a year end closing (year end fiscal period) December 31.). financial data needs for research analysis purpose from years 2007 to 2011 are available in Datastream and Eikon. & Loftus. In addition. 607 in 2008 . 640 samples are acquired in year 2007 . that is the gradual and planned method will be equally full convergence by 2012 (PwC. and. Research period starting from 2007 to 2011 which is the period towards full convergence process in which the IFRS based standards have come into effective applied gradually in the three sample countries. Chia. and property industry. Malaysia. and Singapore as having the process and plan convergence which are almost the same. The fourth sensitivity testing is used to check the explanatory power of by splitting the samples based on the size of large and small companies. This study analyzes are limited to the research object of Indonesia. and 651 in 2011 . it will be analyzed the value relevance with decomposition model through the value. Malaysia. insurance.

Malaysia. Outliers treat with winsorized technique at top and bottom 1%. This means that the information of book value equity and net income is individually relevant in representing the market value of the company in which the higher book value equity and net income means the higher company's market value. (2003) and Saudagaran and Diga (1998) show that reporting in Indonesia. In this study is used to measure the goodness of fit as this measurement has considered the effects of the predictive power that owned by independent variables (Lind et al. In this case. the investors have the contra perception against its concept usage because they feel that the implementation of fair value accounting is not considered to be ascertained the truth and allow the different implementation among countries. the argument that can also be used to explain this relationship is Wahyuni (2011) and Ball (2006) studies in which the major problem facing related IFRS convergence is on the use of fair value.explain the dependent variable in the model (explanatory power of context. This can lead to a negative perception of investors. the adjusted ). according to Dulitz (2009) principle based by IFRS requires the use of relatively large judgment in its implementation. Negative relationship between IFRS convergence and company’s market value is possible because based on Ball et al. Furthermore. LogIFRS as control variable has a negative relationship to the company’s market value. . even it has the opposite effect. according to Dulitz (2009) principle based by IFRS requires the use of relatively large judgment in the implementation of fair value accounting which is deemed not ascertained the truth and allows different implementation among countries. From these arguments it can be concluded that the higher the level of IFRS convergence will further lower the market value of the company due to a negative perception of investors toward the implementation of fair value and judgment factors which are used . Moreover. 2008).. and Singapore have not an adequate quality of financial reporting yet so that the existence of a quality accounting standard has not been able to change the perception of market participants. The overall and annual cross-sectional tests indicate that the variables of book value equity and net income have a significant positive relationship to the market value of the company consistently. Results and Discussion Table 1 shows a results summary of the regression of cross country main model. In addition.

this result is also consistent with Petreski (2005) which states that IFRS is able to produce relevant and accurate information.00 68.14 0.18 NI 1.44 0.72 3.86*** 6.02% Adj R sq 29.00 78.32 0. ** Significant at the level 5%.63% 14.00 35.97*** 1.00 32.22% 23.57 -0. In addition. Explained that the judgment which is emphasized by the use of IFRS on the one hand gives flexibility for the preparers of financial statements in order .31 3.14*** -1. Then in 2011. Therefore.62 0.27 3.44% .27*** -5. Table 1 Main Cross-Country Regression Model’s Results Overall 2007 2008 2009 2010 2011 BVE 0. there was a decrease of 13.56 -7. Hypothesis 1 is accepted.13 8.12*** 0. * Significant at the level 10% BVE: Book value equity for company i at the end of the financial period (t) divided by the market value of equity at the end of year (t-1).32 4.86 2.08*** 0.77 -6.93 -6.79 -3. However.03*** 0.79% 14.45% 23.96*** 0.95*** -5.11%.27% in 2008 from the previous year.37 0. NI: Net income divided by the market value of equity at the end of year (t-1). From this result. Dulitz (2009) describes a person's perception influence factors that determine the behavior in the process of IFRS adoption (perceived behavioral control) .Hypothesis test result shows that overall book value equity and net income information can explain 29.17 LogIFRS -2. Malaysia.67% F (Prob>F) 195.00 40.82*** 1. it can be concluded that accounting information reported during the period towards full convergence of IFRS for listed companies in Indonesia.20 0.00 8.52% 28. The results indicate that the accounting information reported during the period towards full convergence of IFRS consistent with Alali and Foote research (2012) that shows accounting information based on IFRS as a whole during the period of IFRS acceptance is value relevant for listed companies on Abu Dhabi Stock Exchange. the value relevance decreased again by 10.57% in 2009 and increase again in 2010 to 23.33*** 0.11% 13.23*** 0.21 5.36*** -1.92% 15.63*** R sq 30.03 6.15% 27.84 -3.45*** 0.87 % company’s market value variation at a significance level of 1%.13 5.87% 15.00 N 3193 640 606 623 673 651 *** Significant at the level 1%.07% 12.10 2.32** 0. There was an increase of 12. and Singapore has value relevance statistically.23*** -0. LogIFRS: Logarithm control variable in term level of convergence index of a country's local GAAP to IFRS as international accounting standards (logarithm of the average value of the index) Annual adjusted tests as a basis for measuring the movement of value relevance indicate fluctuated movement from 2007-2011.

In 2007 the company’s book value equity information and net income had value relevance for about 15. indicating that the . Hypothesis 2 is rejected . referring to the study of Ball and Brown (1968).to improve the transparency of disclosure. Malaysia. Annual adjusted as the basis of value relevance measurement in this study shows fluctuated movement during 2007-2011 with a similar pattern with main cross-country regression model’s results. Then. increased again in 2010 to 28.5%.9 %. Malaysia. and Singapore are not increase during the period towards full convergence of IFRS (2007-2011). The number of samples listed companies in Indonesia.7%. This can lead to the inconsistent perception and acceptance from the investors or market participants side towards accounting information value. then as a result the stock market is still tinged with an element of speculation . which later dropped again in 2011 to 11. Results of annual regression are up and down fluctuations and significant at 1% alpha. Therefore. this fluctuations also possible to be occured because of accounting information may not be a primary basis for investors to make investment decisions. The significance of individual coefficients also show a significant positive relationship between the book value equity and net income with company’s value. indicating that the value relevance of accounting information of listed companies in Indonesia.3% toward company’s market price. The first sensitivity analysis is level model testing with the same companies as samples in each year. but on the other hand there is a risk of inconsistencies in its application. which later dropped in 2009 to 16. In 2008 its value increased to 27.8%. Malaysia. and Singapore during 2007-2011 that can be used in this analysis are 414 companies. then this result is consistent with the test results on the main model and can support the acceptance of Hypothesis 1 by considering the consistency of sample firms across the years. It is indicated that the book value equity and net income can explain 32. and Singapore during 2007-2011. Adjusted for the cross-country pricing model analysis with the same number of samples during the years 2007-2011 as a whole is 32. It can be concluded that the overall accounting information reported throughout the period towards full convergence of IFRS has value relevance for the companies listed in Indonesia. Moreover.7%. Regression results indicate a probability value less than 1% alpha.5% variation in the market value of the company at a significance level of 1%. Table 2 shows a results summary of the sensitivity regression tests. The results of the first sensitivity test show consistency with the results of main model test. Annual regression results with each year probability less than 1% alpha.

and Singapore during 2007-2011 are not increase during period towards full convergence of IFRS. the overall significance level is the same for each country.value relevance of accounting information companies listed in Indonesia . Therefore. and Singapore in terms of specific conditions of each country. From the aggregate significance test results indicate significance at the 1% level for each country. Malaysia. Malaysia . the conclusions obtained from additional tests can then be said to be quite relevant and free from bias interpretation that arising from differences in the number of samples across the years. the analysis by considering the consistency of the sample across years the company's refusal to support Hypothesis 2 . The results of cross-country pricing model analysis with the same number of samples during 2007-2011 are consistent and show a similar trend to the results of the pricing model test so that can provide an empirical evidence and internal validity that value relevance fluctuations in this research are not derived from sample size differences problem across the years. While the annual regression tests prove that the value relevance of accounting information of listed companies in Indonesia. Malaysia. . Therefore. it can be concluded that the overall accounting information reported during the period towards full convergence of IFRS has value relevance for listed companies in Indonesia. it can be concluded that the value relevance of accounting information is relatively higher in Singapore than in Indonesia and Malaysia. From the second sensitivity test. consistent with the test results on the primary models. The second sensitivity analysis is a level model testing with analysis by each country. These findings consistently support the acceptance Hypothesis 1 and rejection Hypothesis 2 on the main model testing. and Singapore are not increase during the period towards full IFRS convergence in terms of the specific conditions of each country.

0 195 42.5 20.Table 2 Sensitivity Regression Tests’ Results First Second Indonesia Overall Adj R sq F (Pr>F) 32.5% 16.4 2.4** 0.2 0.0 0.9% 57.0** -0.9 160 24.7*** 2.5 0.4 11.8 5.8* 0.1 0.0% 19.2 320 0.4% 22.3% 44.0 Adj R sq F (Pr>F) 1384 44.0 N 0.5 673 32.9 1.8 25. three months after the end of the financial period under study for Indonesia and Malaysia. the market value of company i two months after the end of the financial period under study for Singapore.2 5.4% 31.5 1. FI: Financial income divided by the market value of equity at the end of year (t-1).0 14. DY: Dummy year as control variables For testing purpose of the cross-section as a whole.6% 414 21.1% 21.0 0.0 186 N 0. Earns: Earning per Share at the end of the financial period (t) divided by stock value at the end of year (t-1).4 1. ΔEarns: Annual changes in Earnings per Share divided by stock value at the end of year (t-1).7 Fourth Singapore 0.2 191 3.5% 143.0 0.0 324 9.1 0.6 0.0% 65.2 187 19.7 651 0. TI: Income Tax divided by the market value of equity at the end of year (t-1).3 15.8% 19.3% 39.8 0.0 0.0 48.0 *** Significant at the level 1%.4 2.8 673 0.0 651 N 0.0 302 25.9 0.0 0.3% 25.0 187 11.9 0.0 606 Fifth Small 0.2*** 1.0 0.0 8.3 0.0% 30.0 336 16.0 N Adj R sq F (Pr>F) 3193 39.4 F (Pr>F) 916 33.0 2010 N 0.4% 41.0 414 Third 23.0 0.3% 47.9% 36. LogIFRS: Logarithm control variable in term level of convergence index of a country's local GAAP to IFRS as international accounting standards (logarithm of the average value of the index).0 1601 12.5% 47.8% 292 893 28.1*** -0.2 32. R: Daily cummulative stock returns for 12 months since financial statements publishing requirement for each country.4 4.0 23.0 15.0 3.5 0.2 171 13.6 N Adj R sq F (Pr>F) 2070 20.2 Adj R sq 0.0 141 Adj R sq 0.3% 119.7% 11.9% 12.6 414 21.9 2.2 313 0.1% 30.0*** 0.8 606 0.6% 0. NI: Net income divided by the market value of equity at the end of year (t-1).0% 48.4% 0.8 12.1 640 27.0 2007 15.0 0.1% 244 20.9 16.0 F (Pr>F) 1592 22.0 0.7% 53.5 1.0 188 12.9% 26. the market value of company i two months after the end of the financial period under study for Singapore.2 0.0 2.4 0.0 310 14.9% 119.8 1.9 0.4 1.0 27.8 12.0 0.3% 11.0% 7.0 8.0 2009 Malaysia 0.0 307 12.0 F (Pr>F) 0. OI: Operating income divided by the market value of equity at the end of year (t-1).6% 23.1 0.1 1.0 320 9. ** Significant at the level 5%.7% 28.0 0.1** 0.6 -0.6 1.1 414 7.0 327 OI FI OTH IT 1.0 -0.0 0.9* 2.0 0. with 2007 as the base year .9 0.6% 142.5 17.0 414 N 0.9 -0.9 640 0. OTH: Other income divided by the market value of equity at the end of year (t-1).2% 18.7% 28.3 304 0.8% 151.0 30.9% 249 19.7*** -5. divided by the market value of equity at the end of year (t-1).8 0.5 0.1% 0.0 2008 27.0 2011 Adj R sq 0. * Significant at the level 10% First Sensitivity Test (level model testing with the same companies as samples every year): = Second Sensitivity Test (level model testing with analysis by each country): + Third Sensitivity Test (return model): = + + = + + Fourth Sensitivity Test (level model testing with splitting the samples by firm size): + + + + + + = Fifth Sensitivity Test (level model testing with decomposition of net income components): + + = + + + + + + + + + MV: The market value of company i at the time of financial statements publishing requirement for each country.2 623 0.1 2.7% 19.9** 1.6 0.6 -5.6 2.3 Large 0. then dummy control variables are used in 2008-2011 ( ). BVE: Book value equity for company i at the end of the financial period (t) divided by the market value of equity at the end of year (t-1).0 337 0.7 -2.2 3.7 203 39.8 623 17.0 29.1% 6.8 0.5% 18.0 14.9* Adj R sq F (Pr>F) 30.9% 186.1% 28.1 N 3193 0.2% 54. three months after the end of the financial period under study for Indonesia and Malaysia.2% 18.0 3.4% 292 24.0 0.4** 0.8 0.

The significance of individual coefficients also show a positive relationship.0 % in the period of the global crisis in 2008 from the previous year. then began to increase by 8. The value relevance of . Easton (1999) also states that the return earnings regression with the presence of a variable that contains this gap can lead to bias so that be concluded that earnings is not a good representation of an event that affects the return during the fiscal period. Later in 2011. Therefore. Malaysia. but only significant for the variable earnings changes across the years to return. The fourth sensitivity analysis is level model with splitting the samples based on size of the company. Overall. the incidence of markets (as reflected by return) in the last period can affect accounting profit in the current period and market events which are happening now may not be reported in the current period earnings accounting. and Singapore are not increase during the period towards full convergence of IFRS (2007-2011).9% variation in the company’s return on equity value at a significance level of 1%. The fourth sensitivity test results demonstrate a consistency with the the main model testing results. Adjusted value for the overall test result was 28. Malaysia. Annual regression results with each year probability less than 1% alpha indicate that the value relevance of accounting information of listed companies in Indonesia.3%. there is a gap between the accounting reporting effects and economic events. the value relevance decreased again by 5. These findings are consistent with the main model testing and in line with Alali and Foote research (2012). and Singapore. Malaysia. There was a decrease of 9.The third sensitivity analysis is the return model. (1992). accounting information reported during the period towards full convergence of IFRS has value relevance for large and small companies listed in Indonesia.7% in 2009 and then increased again in 2010 reached 17. Adjusted as a basis for measuring the value relevance in this study shows fluctuated movement from 2007 to 2011.2%. There are two arguments of the imperfections in the earnings represent a return that is expressed by Easton et al. This results are consistent with the test results on the main model. and Singapore in terms of return model. This indicates that the earnings and earnings changes value across the years with control variable of IFRS convergence level can explain 28. it can be concluded that the overall accounting information reported during the period towards full convergence of IFRS has value relevance for the companies listed in Indonesia. However.9 %. However . the overall regression results indicate a probability value less than 1% alpha. While the effect of earnings variable is not proven statistically significant to return value.

6 % indicated that the book value equity. Malaysia .6 % variation in the market value of the company at the level of significance 1%. and Singapore. operating income. systems. Since the regression results indicate a probability value of less than 1% alpha. Malaysia. At the same significance level. and Singapore. and Singapore are not increase during the period towards full convergence of IFRS. then this result is consistent with the test results on main model and it can be concluded that the overall accounting information reported during the period towards full convergence of IFRS has value relevance for listed companies in Indonesia. Adjusted as a whole is at 30. These results are also consistent with the results of main model testing.accounting information of large and small listed companies in Indonesia . While Wahyuni (2011) also states that there are several issues that affect the adoption of IFRS. The argument of these findings can be constructed from a study refers to Djatej et al. and Singapore are not increase during the period towards full convergence of IFRS (2007-2011). other income. Malaysia. the accounting information has more value relevance for large companies as a whole as well as during the period towards full convergence of IFRS in Indonesia. (2013) which states that the adoption of IFRS requires no small investment nor fee. From the annual significance coefficient test. Malaysia . proven that the components of net income which is increase significance statistically in representing the company's market value during the period towards full convergence of IFRS is information about the company’s operating income with positive relationship. While financial income also . including the human resources training and adequate quality control procedures. and income tax with IFRS convergence level as control variable can explain 30. the movement of the test by using the main model and the decomposition level model have the same pattern. Annual regression results with each year probability less than 1% alpha indicate that the value relevance of accounting information of listed companies in Indonesia . companies that have greater assets are expected to have the greater resources capacity and need to be responsive toward effective enforcement of a new accounting standard . and human resources. Then of course. financial income. The fifth sensitivity analysis is level model testing with decomposition of net income components. In terms of overall annual value relevance. Adjusted shows a fluctuated movement from 2007 to 2011. either in form of money. From these findings it can be concluded that during the IFRS application is certainly necessary resources for implementation within the company.

Malaysia. this study also conducted additional analyzes of five tests. This study tested two matters. and Singapore are not increase during the period towards full convergence of IFRS. level model . which is used in decision making as critical events. Behavioral view of profit concept that emphasizes the income from the operational side. This means that the negative influence of the higher financial income actually reduce the market value of the company. the financial income that can negatively impact operating income associated with the findings of operating income. operating income has a positive effect on an upward trend significance to the market value of the company means that investors assess the accounting information relevant and taken into consideration in making investment decisions. Malaysia. whether the accounting information reported during the period towards full convergence of IFRS has value relevance to those companies and whether the value relevance of accounting information of those companies increase over the period towards full convergence with IFRS using crosssection data analytical methods. is also expressed by Bedford (1965) and Myers (1959). The argument from differences in the association between the two variables is in line with the increase in the value relevance of information for these two variables with two different relationships. and Singapore. On the other hand. overall accounting information reported during the period towards full convergence of IFRS is value relevant for listed companies in Indonesia. This suggests that investors are more likely to positively assess the greater portion of income from operational aspects as the main activity of the company. Conclusion This study aimed to analyze the impact of IFRS convergence on the value relevance of accounting information for listed companies in Indonesia. but shows the opposite sign. then investors will tend to have a perception that the company's net income is not derived from its core business activities thus actually reduce the market value of the company. On the one hand. When the company has large financial income. Second. Several conclusions can be drawn from the results of the level models as the main model in this study. In addition to testing two hypotheses for the effect of IFRS convergence on the value relevance. the test results toward increasing value relevance lead to the conclusion that the value relevance of accounting information value of listed companies in Indonesia. First. Malaysia. and Singapore.increases significance statistically.

First. level model with splitting the samples based on size of the company. the level of IFRS convergence variable has disadvantage of the subjectivity factor and also not directly compare into the standard. All the sensitivity testing results demonstrate the consistency and support the conclusions which are resulted from the main model testing. return model. sample selection can be done in more detail. Third. advisable to conduct a review of the application of IFRS convergence. and level model with decomposition of net income components. can be used non linear alternative models to enrich the value relevance analysis.with same samples of companies during the period of study. . level model with country by country analysis. From policies and public regulations side. without regarding to conditions in Indonesia which is relatively having clear separation of the industry and there are genuine companies carrying on that kinds of industry in Malaysia and Singapore. Then for users of financial statements. could be used more specific control variables to acommodate different characteristic among countries. For the next study. This study also gives some implications. is expected to report sufficient and informative disclosures so that can reinforce judgment that is used to meet the needs and convince the users of financial statements. this study excludes property and real estate industry as a unique condition in Malaysia and Singapore for two types of that industry. model that used in this study is limited to linear model. could be used convergence level measurement method that more comprehensive. For the next study. control variable that used in this study limited to IFRS convergence level. For the next study. government or related agencies should create rules with strict consequences (enforcement). For the company. company is also expected to be more prudent in the use of judgment and the application of fair value accounting. Limitations and Suggestions This study has some limitations and suggestions for further research. Moreover. accounting information is expected to be a major consideration for investors and users of financial statements so that stock market condition is no longer dominated by speculative element. Second. but only limited use of secondary data. For the next study. From the regulator side. Fourth.

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