1- Research problem and questions:
Because of themultiplepositive effectsassociated with the transitiontoInternational Financial Reporting Standardsandthe requesition of the twentiethfrom the KingdomSaudiArabia to shift towards it,asonlyit's appliedcurrentlyon the banking sector, financial services, and insurancecompanies. The the importance ofanalyzing the impact ofthe transition tothese standardson the quality ofaccounting information rises, and the value ofthe listed companiesfromone hand, andthe analysis ofits impact onthe decisions of investorson the other hand.
So the research can formulate theresearch problembyasking the followingquestions:
A. Isthe international financialreporting standardsaffect the quality ofaccounting informationand its explanatoryability? What are themost commonaccountingstandardsthat can measure this quality?
B. Whatis the impact ofthe transition toInternational Financial Reporting Standardson the value oflisted companiesin Saudi Arabia's business environment?
C. What are theimplications ofaccountingfor the transition toInternational Financial Reporting Standardson thedecisions of investorsin Saudi Arabia's business environment?
2- Research Objectives:
The main objective of the research is to test the impact of the transition to International Financial Reporting Standards on the quality of accounting information, and the value of listed companies from one hand, and the analysis of the implications on the decisions of investors in the Saudi business environment on the otherhand .From this main goal the following sub-goals emerges:
A- Testing the impact of the transition to International Financial Reporting Standards on the quality of accounting information and its interpretive ability through analyzing its impact on reducing the value of the total accruals and the qualitative characteristics of accounting information.
B- Testing the impact of the transition to International Financial Reporting Standards on the value of listed companies in the Saudi business environment.
C- The analysis of the implications of the transition to International Financial Reporting Standards on the decisions of investors in the Saudi business environment.
3- The Research importance:
The Academic importance of the research emerges from two sources: First: the importance of the subject of research in contemporary accounting thought, where the subject of international financial reporting standards and the quality of accounting information are of the most important topics that concerned the accounting thoughts, furthermore concerns also were directed towards topics such as quality of accounting information, transparency of financial statements, and the extent of their comparability especially in light of the globalization of capital markets and the need to attract new investors; so the accounting studies focused on the determinants of compliance with International Financial Reporting Standards to try to improve the quality characteristics of accounting information and their interpretive ability to rationalize the decisions of investors and maximizing the value of the company.
Secondly, the research contributes in building a model to test the impact of international financial reporting standards on the quality of accounting information and the value of the company (especially in light of the multiplicity of their measuring models) through the introduction of new variables to the models that have already been made by previous studies, which reflects new indicators that are significant in explaining the relationship the international Financial Reporting standards and the quality of accounting information and the value of the company, and the impact on the economic decisions of investors.
From the practical side the importance of research emerges from presenting a practical guide to the impact of the transition to International Financial Reporting Standards on the quality of accounting information, and the value of companies listed on the Saudi environment, especially with the begining of the transformation to these standards (in the banking sector, financial services, and the Saudi Arabian insurance companies) , which may provide useful information for regulatory bodies responsible for the application, and the development of standards on the decision to switch to in the rest of the economy. Also the importance of research rises from the growing pressures on companies by the professional bodies and investors to provide accounting information of high quality to be used in making different decisions.
4- ResearchHypotheses:
A- The transition to the international financial reporting standards affects positively the quality of accounting information in Listed Saudi companies.
B- The transition to the International Financial Reporting Standards affects positively the value of the listed Saudi companies.
C- The transitionto the International Financial Reporting Standards affects positively the decisions of investors in the Saudi capital securities market.
5- Research Methodology and model building:
The research methodology is based on the Content Analysis analysismethod by analaysing the financial reports of the listed Saudi companies, that belong to the banking sector, and financial services, and insurance companies during the period of pre-transition to International Financial Reporting Standards (2007) and the period after the transition to thefinancial reporting standards international (2010 to 2013 mThe researcher also relied on the survey method in the poll sample of investors in Saudi companies to measure their attitudes toward the transition to International Financial Reporting Standards and its impact on their investment decisions. The research methodology can be presented through the following points:
6- The Research plan:
The Research is divided as follows Section I: General framework of the research, Section II: The relationship between the application of international financial reporting and accounting information quality and value of the company's standards., Section III: Analysis of the impact of international financial reporting standards on the decisions of investors in the Saudi business environment., Section IV: previous studies and the developing the hypotheses, Section V: the the research mythodology and the building of the model, Section VI the applied study design, Section VII: analayzingthe applied study and testing the hypotheses and Section VIII: findings, recommendations and areas for future research.
7- Findings, recommendations and proposals for future
7.1 Results:
1. multiple positive effects of the transition to International Financial Reporting Standards, and the most important are : reducing the differences between these reports in various countries, and strengthen the comparable financial information, improving theirexplanatory ability as an indicator of the company's performance, reducing the cost and improve transparency, reducing information asymmetry, increasing the quality of financial reporting, and gives a great opportunity management to reduce the earnings management practices and fraud processes associated with predictions.
2. the concept of accounting information qualitsreflects the characteristics of these information (basic or enhanced) and the extent of its credibility and its ability to achieve the needs of their users, its achievement depends on: the quality of the applicable accounting standards, the motives of management, and the availability of strong professional organizations, and the quality of the auditing process, as well as the quality of corporate governance practices.
3. The presence of a statistically significant positive correlation between international financial reporting standards and the quality of accounting information represented in the decrease of total accruals which proves the validity of the first hypothesis.
4. transition to International Financial Reporting Standards has a positive effect on the value of listed companies in the Saudi business environment also transition to these standards contribute to improving the financial performance of the company as it was increased (Tobin's q) of (1.9676) in the year (2007) to (3.3058) in (2013), and the (P value)was less than the level of significance of(0.05) which proves the validity of the second hypothesis.
5. transition to International Financial Reporting Standards has a positive effect on the decisions and directions of investors in Saudi Arabia, , the sample of the study confirmed that the financial reporting standards contribute to improving the quality of financial reporting with a mean of (3.7254), and the increase of the value of the company with a mean of (3.7400), also clarity and transparency in accounting procedures by mean of (3.6071), which proves the validity of the third hypothesis.
6. the regression results showed the presence of a positive statistically significant effect for each of the size of the company, and if it relates to the an international audit officeon the quality of accounting information, and the value of the company in light of the application of International Financial Reporting Standards, while there is an inverse relationship and statistically significant differences between the financial laverage degree and the accounting information quality and value of the company.
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7/2 Recommendations:
In light of the results that have been reached in both theoretical and applied study, the researcher recommends the following:
1. the importance of knowing of the ability of all sectors to the transition to International Financial Reporting Standards in light of the benefit from the experiences of countries that have taken serious steps in compliance with these standards.
2. the Saudi capital market should oblige all companies that are going to list their securities in the stock market to applying the international financial reporting standards as several studies showed the positive effects of these standards in improving the transparency of financial statements, increasing their quality, strengthen the comparability, and achieve many of the benefits to investors and improving the effectiveness of financial markets.
3. Increase the preparers and users of financial reports, awareness, providing workshops and training courses for accountants about these standards, and teaching in Saudi universities, as well as the organizers of the accounting and auditing professions in the KSA to provide explanations for those standards so as not to lead to different interpretations.
4. Increasing the company's attention to developments in the International Financial Reporting Standards, both of measurement or accounting disclosure, in order to improve the quality of financial reporting and reduce information asymmetry, which gives a positive signal to investors about the company's financial performance, and increase confidence in the financial statements.
5. Increasing the attention of the auditors of national accounts in the KSA to the International Financial Reporting Standards through: the provision of training courses for workers on these standards, or coporating with global audit firms; to acquire the necessary expertise in the audit of the financial statements prepared in accordance with these standards.
7/3 Future proposals:
The Researcher finds in the light of what has been reached from the results that there are many areas that can serve as a basis for future research, including the following:
1. Expand the study sample to include a comparison between sectors applying the International Financial Reporting Standards, and other sectors applying the Saudi accounting standards, or the comparison with one of the Gulf or Arab states with similar conditions in order to confirm or refute the findings of this study.
2. The use of alternative measures of the quality of accounting information in light of the multiplicity of measuring models such as: (a book value relative to the market value model, and the symmetric timing model), and the value of the company (market value added) and the decisions and directions of investors.
3. 3. The study of the relationship between international financial reporting standards and some other aspects, such as audit fees (in light of their impact on the auditor effort, and the quality of financial reporting), and the quality of the accounting profits, and the characteristics of the Company.;
the quality of accounting information |
