Assessing the Impacts of IFRS Adoption on Capital Structure, Corporate and Macroeconomic Performances in the Republic of South Africa

Abstract

This dissertation assesses the impacts of accounting information environment on the influence of IFRS adoption on capital structure, corporate and macroeconomic performances in the Republic of South Africa. The study uses a sample of forty- nine listed Agricultural, Construction, Manufacturing, and Mining firms in South Africa that have consistently published annual reports for the 2001- 2014 period. Cost of equity capital, cost of debt capital, market price per share, and equity returns is the capital structure indicators used. In contrast, the firm performance indicators used are returns on investment capital, earnings per share, operations margin, and profitability. Moreover, interest rates, economic growth, and the exchange rate form the macroeconomic indicators. The estimation techniques employed are the pooled Ordinary Least Square (OLS), the random effects, and the fixed effects regressions depending on which one fits best. Though IFRS adoption had a significant positive and negative impact on the market price per share and equity returns, the interaction of accounting information environment with IFRS had no statistically significant impact on the cost of equity capital and debt capital. Neither only IFRS adoption nor its interaction with the accounting information environment had a statistically significant impact on the profitability of the sampled firms. IFRS adoption significantly increased return on investment capital, earnings per share, and operations margins, but the interaction of IFRS adoption with accounting information environment, except analyst following, did not significantly have an impact on any of the corporate performance indicators. IFRS amid analysts following significantly reduced earnings per share of the sampled firms. IFRS adoption significantly reduced gross domestic product growth and interest rate, but its interaction with accounting information environment had no statistically significant impact on them.