Asset informativeness and the systematic risk of regulated infrastructure firms after the adoption of IFRS in Brazil

This study analyzes the relationship between the informativeness of accounting assets and the systematic risk of regulated infrastructure firms in Brazil following the adoption of IFRS, with a focus on companies applying IFRIC 12. Using data from 89 Brazilian firms listed on B3, including 21 regulated firms that adopted IFRIC 12, panel data linear regressions were performed using the difference-in-differences method, covering the period from 2004 to 2022. Asset informativeness was measured by the coefficient of determination (R²) in regressions of operating income on lagged assets. This study stands out by exploring a relatively under-researched topic: asset informativeness. The findings show that the informativeness of accounting assets in firms applying IFRIC 12 under IFRS is associated with a reduction in systematic risk. However, for firms in general, asset informativeness is positively associated with systematic risk over the entire study period, but negatively associated after IFRS adoption. This study contributes to the literature by introducing a new measure to assess the quality of accounting information and by focusing on firms that applied IFRIC 12. It offers practical insights to financial statement preparers by showing how IFRS and IFRIC 12 enhanced the asset’s ability to explain firm performance, thereby reducing systematic risk. It also helps to understand how accounting choices and methods can impact assets and, consequently, firm risk. Additionally, the study supports policymakers, regulators, and investors in identifying the economic consequences of mandatory IFRS adoption on systematic risk, and how this may influence firms’ cost of capital and economic value.