IFRS 8 and the cost of capital in Europe

Ahmed Saleh, Ahmed Aboud, Yasser Eliwa

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Abstract

This study examines segment reporting information usefulness after the adoption of IFRS 8 in 18 European Union countries. Specifically, 1) we introduce a new comprehensive measure of segment reporting quality that reflects four different dimensions of segment information, 2) we investigate the impact of segment reporting quality on the cost of equity and debt capital after the adoption of IFRS 8, and 3) we investigate the moderating role of the country-level enforcement system on the association between segment reporting quality and the cost of equity and debt capital after the adoption of IFRS 8. Using a self-constructed segment reporting quality measure and a sample of 884 firm-year observations over the period of 2007 to 2011, we provide evidence that investors and lending institutions find no change in the usefulness of segment reporting after the adoption of IFRS 8. Our study is original in using a comprehensive measure of segment reporting quality. Furthermore, our study is the first to examine the relationship between segment reporting quality and the cost of debt capital after the adoption of IFRS 8 and the moderating role of the country-level enforcement system. Our findings provide useful insights to regulator and accounting standard-setting bodies about segment reporting.

Original languageEnglish
Number of pages34
JournalJournal of Economics and Finance
Early online date19 Jan 2022
DOIs
Publication statusEarly online - 19 Jan 2022

Keywords

  • IFRS 8
  • segment reporting quality
  • the cost of debt capital
  • the cost of equity capital
  • the European Union
  • the management approach

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