The informational relevance of IFRS 9 adoption: emerging market evidence

Purpose This study aims to examine the value relevance of accounting information among African banks following the adoption of International Financial Reporting Standard 9-Financial Instruments (IFRS 9), the latest regulatory standard on financial instruments. Design/methodology/approach Using the price regression and return regression models, we test the informativeness of earnings, equity book values and earnings change post-IFRS 9 adoption. Findings We find evidence that IFRS 9 adoption enhances the informativeness of earnings. However, equity book values were more value-relevant under the previous IAS 39 regime. These findings remain robust to different model specifications. Further analysis reveals that IFRS 9 adoption has no informational value in an environment of low regulatory and enforcement quality, highlighting the crucial role of institutional structures in ensuring consistent application of the standard across jurisdictions. Practical implications Our findings support the notion that stronger regulatory oversight enhances the value relevance of IFRS 9 adoption. Thus, emerging countries such as Sub-Saharan African countries usually characterized by low regulatory enforcement could leverage optimal benefits from the adoption of high-quality standards such as IFRS 9 by prioritizing the strengthening of regulatory frameworks that effectively monitor IFRS compliance to enhance trust and market discipline in the financial markets. The findings are largely consistent with other non-African studies and imply consistent application of the standard is imperative to derive the intended benefits of the standard regardless of the geographical region of implementation. Originality/value To the best of our knowledge, this paper is the first empirical study to provide evidence on the value relevance of reported financial information under IFRS 9 in emerging markets, particularly Africa which is significantly under-represented in IFRS studies despite its unique context. By focusing on the unique African setting unlike previous studies, our paper builds upon previous research and extends our understanding of the economic outcomes of IFRS adoption in an emerging market. Moreso, the study is a response to the call by Awuye and Taylor (2024) whose systematic literature review on IFRS 9 adoption unveiled the paucity of research in emerging markets like Africa.