Has the mandatory adoption of IFRS impacted the cost of capital: An examination of impact on the cost of equity capital of listed non-financial firms in Ghana
The mandatory adoption of IFRS by most countries around the world represented a paradigm shift in global financial reporting. Several studies have been conducted to measure the impact of the new accounting regime on firms. This paper examines the impact of IFRS adoption on cost of equity capital of listed non-financial firms in Ghana. Annual reports of sampled companies are used in gathering firm specific data whiles market data are sourced from various Governmental Institutions. A total of 16 companies are sampled to cover the study period, 2002-2012. The results of the study show that there is a significant negative relationship between IFRS and cost of equity. This implies that the adoption of IFRS in Ghana reduces the cost of equity capital of firms listed on the Ghana Stock Exchange. The results of the interactive model indicates that, choice of auditor was a significant factor in the determination of cost of equity in the pre-adoption period. However, in the post adoption period, performance (ROE) is the statistically significant variable in determining cost of equity. This implies that investors and analysts relied extensively on the work of external auditors in their decision making. Post adoption investors and analysts appear to have shifted attention to the performance of firms in making decisions regarding cost of equity capital.
Evans Akomeah. Has the mandatory adoption of IFRS impacted the cost of capital: An examination of impact on the cost of equity capital of listed non-financial firms in Ghana. International Journal of Advanced Research and Development, Volume 4, Issue 1, 2019, Pages 05-13