Abstract

This study examines the decision-usefulness of financial information produced in
the external financial reports from the implementation of the International
Accounting Standards (IAS) and the International Financial Reporting Standards
(IFRS) to equity investors of the Amman Stock Exchange (ASE) in their
investment decision-making process. The study employs mixed method research
that uses quantitative and qualitative methods. The quantitative research
methodology employs archival financial data from the ASE using inferential
statistics to investigate the association between share market prices and a well
known model, the residual earnings model, derived from (Preinreich 1938, Ohlson
(1995) Feltham and Olson (1995). Data is collected from companies listed on the
ASE for the period before implementation of the IAS/IFRS, 1980-1989, and for the
period after implementation, 1991-2009. In general, the results indicate a
statistical association between share market prices and book value per share
(BVPS) and residual earnings per share (REPS) with the BVPS robust to share
market prices. The second quantitative method employs questionnaires
administered to individual and institutional equity investors of the ASE. Key
findings indicate that equity investors believe the implementation of the IAS/IFRS
produces decision-useful financial information, that the accounting information has
the useful qualitative characteristics proposed by the International Accounting
Standards Board and that the price-to-book ratio, the dividend discount model and
the price-earnings multiple are very useful models as inputs into their investment
decision-making process. Semi-structured interviews were conducted to
accounting, auditing and ASE experts in Jordan. Prevalent findings indicate that
developments within the ASE and accounting profession have influenced the
decision-usefulness of financial information. Few believed that Jordan should
develop its own accounting standards. This research contributes to knowledge,
being the first comprehensive study that employs a mixed method research using
archival financial data for a 29-year study period from the ASE and primary data
to evaluate the decision-usefulness of financial information produced from
implementing the IAS/IFRS. Furthermore, this research fills a gap in the literature
by examining the period before IAS/IFRS implementation and the period after
implementation in Jordan to determine if IAS/IFRS implementation resulted in
decision-useful financial information. The main implication of this research is that
reported financial information has greater decision-usefulness after the
implementation of the IAS/IFRS than before, implying positive effects of
accounting standard-setting in an emerging economy.