The value of discretion in Africa: Evidence from acquired intangible assets under IFRS 3

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dc.citation.issue2
dc.citation.volume55
dc.contributor.authorTunyi A
dc.contributor.authorEhalaiye D
dc.contributor.authorGyapong E
dc.contributor.authorNtim C
dc.contributor.editorChaney, PK
dc.date.available2020-06
dc.date.issued2020-06
dc.description
dc.description.abstractThis paper examines the value of managerial discretion in financial reporting by exploring the value relevance of intangible assets acquired in business combinations (AIA) before and after the 2008 International Financial Reporting Standard (IFRS) 3 amendment. The 2008 IFRS 3 amendment gave managers the discretion to recognize previously unrecognized intangibles in the target firm, hence, we posit that if managerial discretion improves the quality of financial reporting, we should observe an increase in the value relevance of AIA after the amendment. Our empirical analysis is based on a dataset of 603 mergers announced between 2004 and 2016, across seven African countries. Consistent with our main hypothesis, we find that the value relevance of AIA, predominantly acquired goodwill (AGW), increased after the amendment, suggesting that managerial discretion improves the quality of financial information. Our results further show that the value of discretion is moderated by the underlying institutional quality, with the value relevance of AIA being greater in high-quality institutional contexts. Our findings are robust to alternative measures of AIA, alternative models for testing value relevance, and various controls for endogeneity. Overall, our findings have important implications for accounting standard-setters, governments, investors, and practitioners.
dc.description.confidentialfalse
dc.edition.editionJune 2020
dc.format.extent? - ? (39)
dc.identifierhttps://www.worldscientific.com/doi/abs/10.1142/S1094406020500080
dc.identifier2050008
dc.identifier.citationThe International Journal of Accounting, 2020, June 2020, 55 (2), pp. ? - ? (39)
dc.identifier.doi10.1142/S1094406020500080
dc.identifier.eissn2213-3933
dc.identifier.elements-id428849
dc.identifier.harvestedMassey_Dark
dc.identifier.issn1094-4060
dc.languageEnglish
dc.publisherWorld Scientific Publishing Company
dc.publisher.urihttps://www.worldscientific.com/doi/abs/10.1142/S1094406020500080
dc.relation.isPartOfThe International Journal of Accounting
dc.rights(c) The author/s
dc.subjectManagerial discretion
dc.subjectIFRS 3
dc.subjectacquired intangible assets
dc.subjectbusiness combinations
dc.subjectinstitutional quality
dc.subjectAfrica
dc.subject.anzsrc1501 Accounting, Auditing and Accountability
dc.titleThe value of discretion in Africa: Evidence from acquired intangible assets under IFRS 3
dc.typeJournal article
pubs.notesNot known
pubs.organisational-group/Massey University
pubs.organisational-group/Massey University/Massey Business School
pubs.organisational-group/Massey University/Massey Business School/School of Accountancy
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