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Abstract
Purpose: This study aims to investigate the differences between pre- and post-adoption of International Financial Reporting Standards 9 (IFRS 9) among Malaysian listed companies' financial statements with a focus on key financial and market performance indicators such as asset turnover, liquidity, net profit margin, return-on-assets, retum-on-equity, growth, and Tobin's q. It also pursues to examine the impact of the adoption of IFRS 9 on the level of conditional conservatism. In addition, this study explores the effect of conditional conservatism after taking into consideration the moderating role of the quality of external auditing.
Design/methodology/approach: Using the accounting conservatism model developed by Khan and Watts (1997), the authors compare the level of a firm's conditional conservatism during pre- and post-adoption of the IFRS 9. The sample consisted of non-financial companies that were listed on the Bursa Malaysia Main Market between 2015 and 2020. There are 1,566 firm-years that consist of 357 companies from non-financial industries. The data are analyzed using ordinary least squares (OLS) regression.
Findings: This study found that reported financial and market performance is being negatively impacted by the implementation of IFRS 9. On the other hand, the influence of IFRS 9 on the conditional conservatism of Malaysian's non-financial firms is, on the contrary, positive. The additional test reveals that the firms face greater impact on conditional conservative accounting for companies with higher auditing quality.
Research limitations/implications: The study only focuses on the influence of IFRS 9 on two main areas of concern, which are first, reported financial and market performance, and second, firm-level conditional conservatism. In future, other interesting topics with regards to post-implementation of IFRS 9 could be examined to refine the cost and benefits of IFRS 9 towards financial reporting quality. Furthermore, this study only assesses the moderating effects of auditing quality and omits possible control of firm governance characteristics; therefore, future research could explore a broader perspective in terms of corporate governance or board characteristics.
Practical implications: This study contributes novel insights to the reported financial and market performance of non-financial firms pre- and post-adoption of IFRS 9. Likewise, research findings suggest that non-financial firms' conditional conservatism has risen during IFRS 9 post-adoption period and that these effects are more pronounced for companies with higher auditing quality. These results...