The impact of accounting changes on accounting information efficiency and firm image: an empirical research of Thai-listed firms.

Author:Tangpinyoputtikhun, Yanin
Position:Report - Survey

    Over the last few years there has been a significant increase in the acceptance of International Financial Reporting Standards (IFRSs) which are issued by the International Accounting Standards Board (IASB). IASB was established in 2001 to replace its predecessor the International Accounting Standards Committee (IASC). The standards formulated by the IASB are referred to as International Financial Reporting Standards (IFRSs), whereas the standards issued by the IASC are known as International Accounting Standards (IASs). Because of the forces of globalization and political expediency are forcing an increasing number of countries to adopt IFRSs. The result impact the optimistic future for firm adaptation. Regardless of when or how we get there, it is expected that the United States will eventually join the more than 100 countries that have adopted IFRSs. With all of the changes that need to be made to accounting policies and practices as well as to business strategies, systems and processes, significant work relating to IFRS conversion needs to be undertaken once the roadmap and proposed timeline are finalized. If they have not done so already, firms must begin to assess what the overall impact will be, when they should start their preparations and then create a realistic timeline for conversion. A clear understanding of the magnitude of these anticipated changes is critical to businesses, as a conversion to IFRSs will have a significant impact on virtually every aspect of the business.

    Much of the existing research into accounting change has drawn on the model developed by Rogers (1962) and Rogers and Shoemaker (1971). This research investigates the proposition that new accounting methods and standards can be conceived as innovations and that the phenomenon of accounting change is potentially explicable in terms of the theory of "diffusion of innovation" (Rogers, 1962; Rogers and Shoemaker, 1971). For this research, accounting changes is highlighted to mention for revolutionize of accounting, such as policies, practices, procedures, standards, regulations, etc. nowadays. Hopwood (1987) claimed that very little was known of accounting change. Some researchers have offered general models of accounting change (Laughlin, 1991). Others have examined the drivers and correlates of change (Anderson, 1995; Gosselin, 1997; Libby and Waterhouse, 1996), the 'conditions of possibility for change' (Bhimani, 1993) and the influence of institutionalized elements on accounting change (Abernethy and Chua, 1996; Burns and Scapens, 2000). The effects of accounting change have been found to be paradoxical--both intended and unintended, determinate and ambiguous, proximate and remote. Detailed case studies have mapped out the politics of change, sites of resistance, and the activities of champions and influential agents in change processes (Chua, 1995; Briers and Chua, 2001).

    It was a situation where accounting changes could have been expected, but where it was not much encountered. To clearly understand the roles of accounting change is exploited and utilized to explain and describe accounting phenomena. Literature of organizational decision-making and the recent literature on accounting change, drawing primarily on the institutional framework suggested by Burns and Scapens (2000). Accordingly, accounting systems and practices are regarded as constituting relatively stable organizational rules and routines, which encode the 'taken-for-granted' issues at the institutional level and become enacted in the realm of action. Recently, a quite extensive and growing literature exists on the drivers of accounting change, change processes, resistance, and the consequences of change (Burns and Vaivio, 2001). Several studies of accounting change analyze organizational tensions, conflicts, and resistance toward change endeavors, or failures of change (Malmi, 1997; Granlund, 1998, 2001). Another cluster of recent accounting change literature is based on the model of Innes and Mitchell (1990), further refined by Cobb, Helliar, and Mitchell (1995), primarily attempting to explain accounting change (Vaivio, 1999; Kasurinen, 1999). Many of the management accounting change studies examine change as a process, being based on longitudinal case research (Anderson, 1995; Granlund, 1998, 2001; Tuomela, 2000). Prior studies have normally, with the notable exception of Granlund (1998, 2001).

    By viewing corporate reporting regulation as a social system, policy makers become seen as a constituent part of that system and themselves subject to change. Attention is directed, therefore, not only to change within the system, but also to change of the system. The process of accounting policy formulation becomes an outcome of the system, one aspect of the behavior exhibited by actors within it. Change, itself, becomes seen as a natural phenomenon of social systems, and not solely as a process whereby policy makers obtain acceptance of a particular accounting change. As aforementioned, corporate reporting regulation is viewed as a social system, and change analysis is used to induce the essential properties of that system. Understanding the process of accounting policy formulation in any nation requires the study of more than a single instance of change, and more than just the contemporary state of the system of corporate reporting regulation. The potential effects of such projects on the informal domain have been targets of much less attention in prior studies on accounting changes. This research deals both with accounting standard changes and accounting regulation changes. The quality of firm's information as accounting information efficiency is affected by accounting changes. In another word, accounting changes tends to become key determinants of the usefulness of firm's financial statement.

    Accounting information efficiency certainly is utilized by users for the better decision-making, and then reflected to firm image in the long-term. An image is a pattern of constructs, beliefs, and interpersonal "facts"; the process by which the image originates and undergoes modifications is adoption. For example, the force consumers rely more on cues and information signals that are generally available to them, such as firm image. Rao, Qu, and Ruekert (1997) states the brands convey important information about a firm's image. Andrew (1998) argues that extensions of corporate brands are in effect image transfers. In the services marketing literature, the firm image concept has not featured prominently. Although some attention has been paid to the conceptualization of firm image in services positioning (Gronroos, 1993), the concept has remained vague. In addition, firm image represents the impressions and associations, the beliefs and attitudes that are held in consumer memory with regard to the company (Barich and Kotler, 1991; Keller, 1993). Firm image was manipulated on three levels: (1) pioneer image; (2) innovative late mover; (3) control company with neutral image. The concepts of firm image represent a relatively new and supplemental lens through which top management can view and address the strategic issues facing the firm. This perspective envisages the firm's image as vital strategic resources.

    Thus, the above remarks lead to four research questions. Firstly, how does accounting changes impact accounting information efficiency. Secondly, how does moderator--technology capability influence on the relationship between accounting changes and accounting information efficiency. Thirdly, how does accounting information efficiency affect next to firm image. Lastly, how does moderator--stakeholder recognition influence on the relationship between accounting information efficiency and firm image.

    The remainder of the paper is as follows. The second section provides the literature review and links to the hypothesis development. The third section describes the research design, including the rational behind the measures included in the research. The fourth section describes the tests of the research questions and results as well as the reasonable discussion. The fifth section is contributions of this research and suggestion for future research. The last section concludes.


    With regard to the previous mentions, this research attempts to examine the impact of accounting changes on accounting information efficiency and reflect to firm image of listed firms in Thailand. Accounting changes consist of standard and regulation changes are important major driving forces of accounting information efficiency. According to existing literatures, accounting changes are hypothesized definitely to have positive effect on accounting information efficiency and impact next to firm image, including both moderators are shown as research model in figure 1.


    2.1 Accounting Changes

    Watts and Zimmerman (1990) describe the importance of accounting changes in the contracting process. Borrowers can use voluntary accounting changes ex post to avoid covenant violations, which increases the moral hazard and adverse selection costs associated with the contracts. In contrast, standard setters impose mandatory accounting changes externally and, therefore, these changes impose only limited additional moral hazard costs on the contracting parties. Mandatory accounting changes nevertheless impose additional contracting costs because they increase the costs of investigating and resolving inadvertent violations, and they increase the costs associated with delays in covenant violations that predict default. Jensen and Meckling (1976) hypothesize that lenders ex ante anticipate the moral hazard and adverse selection costs associated with voluntary accounting changes and protect themselves against this possibility. Borrowers are willing to pay the higher interest rate if they sufficiently value the flexibility provided by...

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