Zampella, Annamaria (2017) THE VALUE RELEVANCE OF IFRS 7. EVIDENCE FROM EUROPEAN BANKING SECTOR. [Tesi di dottorato]

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Item Type: Tesi di dottorato
Lingua: English
Title: THE VALUE RELEVANCE OF IFRS 7. EVIDENCE FROM EUROPEAN BANKING SECTOR
Creators:
CreatorsEmail
Zampella, Annamariaannamaria.zampella@unina.it
Date: 9 April 2017
Number of Pages: 110
Institution: Università degli Studi di Napoli Federico II
Department: Economia, Management e Istituzioni
Dottorato: Management
Ciclo di dottorato: 29
Coordinatore del Corso di dottorato:
nomeemail
Mele, Cristinacristina.mele@unina.it
Tutor:
nomeemail
Allini, AlessandraUNSPECIFIED
Date: 9 April 2017
Number of Pages: 110
Uncontrolled Keywords: value relevance, IFRS 7, banks
Settori scientifico-disciplinari del MIUR: Area 13 - Scienze economiche e statistiche > SECS-P/07 - Economia aziendale
Date Deposited: 09 May 2017 11:34
Last Modified: 13 Mar 2018 10:26
URI: http://www.fedoa.unina.it/id/eprint/11706
DOI: 10.6093/UNINA/FEDOA/11706

Abstract

Before 2007, European banks and other financial activities were characterized, on the one hand, by high income, many assets on and off balance and strong recourse to the use of leverage; on the other hand, the inappropriate use of derivatives, securitization containing collateralized debt obligation and (CDO) and credit default swap (CDS), and the conceding of subprime loans have created the conditions of the financial crisis. The lack of confidence generated in the financial market has made it increasingly pressing need for better disclosure to all stakeholders, as an important element to ease the funding of other venture capital and/or debt aimed at improving the competitiveness and growth. The quality of the relationships between the bank and the market is linked to the ability to communicate their economic and financial performance, highlighting the risks that characterize its core business. The information opacity of credit intermediaries is often caused by both managerial opportunism phenomena and by excessive cost of disclosure. The predominant literature, indeed, claims that there are many advantages of a good disclosure that results in reduction of the cost of capital (Diamond and Verrecchia, 1991), easy access to found (Linsey and Schrives, 2005), creation of more stability in the whole banking industry and consequent reduction of systemic risk (Nier and Baumann, 2006), and effective tool for avoiding banking crises (Financial Stability Board, 2012). However, other Authors argue that there are some disadvantages related to the excessive disclosure due to the complexity of financial instruments because markets are unable to incorporate additional information in a beneficial way (Hodder et al., 2001; Hassan et al., 2009; Hassan and Mohd-Saleh, 2010; Siregar et al. 2013). In addition, banks often oppose to requirements asking for higher disclosures because they determine significant costs (Mozes, 2002, Gebhardt, 2004). In order to respond to the aforementioned situation of crisis, the International Accounting Standards Board (IASB) has issued the IFRS 7: Financial Instruments Disclosure, an ad hoc accounting standard which identifies the minimal disclosure requirements that entities must meet to communicate to investors the risks arising from financial instruments used. The value relevance of financial instruments risk disclosure is an important key factor for a transparent relationship between banks and stakeholders, in particular investors, because, first of all, the last financial crisis has revealed the weaknesses of the European banking system and related disclosure; secondly, banks’ regulatory framework is complex, so it is possible to detect cases of information opacity, because it is formulated by a range of different bodies (i.e. local banking authority, Basel Committee and European Banking Authority - EBA); lastly, a gap in the literature of the relevance of financial instruments risk disclosure in the banking sector exists. On this basis, the aim of this thesis is to test the value relevance of the financial instruments risk disclosure (FIRD) from the users’ perspective, as recommended by the IFRS 7 in the European banking sector. In particular, UK, Germany, Italy, Spain and France are investigated because they are countries with highest capitalization in Europe from 2007, year of IFRS 7 entry in force, to 2014, last year available. Final results show that only qualitative index has a positive effect on banks’ value, meaning that qualitative disclosure recommended by IFRS 7 is value relevant. Maybe qualitative information can be easily found because it is supposed to have a clearer language (Pucci and Tutino, 2012). Instead, the quantitative disclosure index is not relevant for investors because of uncertainty, multi-person settings with conflicts of interest, and information asymmetry.

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