IFRS adoption and the value relevance of accounting information: A panel data analysis of Egypt's emerging capital market

Abstract

This study examines the impact of mandatory International Financial Reporting Standards (IFRS) adoption on the value relevance of accounting information in Egypt's emerging capital market. Using a panel dataset of 631 firm-year observations from non-financial companies listed on the Egyptian Stock Exchange during 2012–2024, the study investigates the association between stock prices and two key accounting measures, earnings per share (EPS) and book value per share (BVS), before and after the mandatory adoption of IFRS in 2016. The empirical analysis employs price-level valuation models, firm fixed-effects panel regressions with interaction terms, and robustness tests incorporating macroeconomic controls and year fixed effects. The findings reveal a significant structural change in the relationship between accounting information and market values following IFRS adoption. Specifically, the interaction between book value and IFRS adoption is positive and highly significant, indicating that IFRS implementation enhances the value relevance of balance-sheet information. In contrast, the interaction between earnings and IFRS adoption is statistically insignificant, suggesting limited improvement in the contemporaneous informativeness of earnings. Additional analyses show that value relevance varies across firm characteristics, with stronger effects observed among profit-making firms, Big4-audited firms, and larger companies. Overall, the results suggest that IFRS adoption improves the usefulness of financial reporting for equity valuation primarily through enhanced balance-sheet information. The study contributes new evidence from an emerging capital market and offers insights for investors, regulators, auditors, and policymakers seeking to improve financial reporting quality and market transparency.