Essays on cash holdings, accounting quality and cost of capital under IFRS adoption in Latin America

• Autor(a) principal: Tortoli, Júlia Peres
• Data de Publicação: 2021
• Tipo de documento: Tese
• Idioma: eng
• Título da fonte: Biblioteca Digital de Teses e Dissertações da USP
• Texto Completo: https://www.teses.usp.br/teses/disponiveis/96/96133/tde-24092021-171706/
• topic: Accruals; Accruals; América Latina; Cash holdings; Cost of capital; Custo de capital; IFRS; IFRS; Latin America; Saldo de caixa

This thesis aims to explore the relations between cash holdings, accounting quality and cost of capital in the context of IFRS adoption in Latin America. In the first essay, we verified the effect of IFRS adoption on accounting quality, especially, earnings management practices. The results show that the adoption of IFRS standards reduced the scope of earnings management practices in Latin American firms. The results also show that IFRS adoption has decreased cash holdings in these firms, as a consequence of higher quality standards. Additional findings suggest that the benefits of IFRS adoption is more pronounced in non-ADR firms since ADR firms present strong incentives to improve the level of accounting information quality. In the second essay, we analyzed the effects of IFRS adoption in the relationship between cash holdings and the cost of capital in Latin American firms. Our findings demonstrated that IFRS adoption impacted the relationship between cash holdings and cost of equity in Latin American firms. That is, when the firms increase cost of equity post-IFRS adoption, they also increase cash levels. Additional analysis demonstrated that IFRS adoption impacted cost of equity only in non-internationalized firms since these firms are more likely to face challenges in relation to the cost of capital than its counterparts. For the cost of debt, we did not find significant results since creditors already have their own mechanisms for loans guarantees. Finally, in the third essay, we analyzed whether discretionary accruals measured by gross income are value relevant in the context of IFRS adoption, comparing with discretionary accruals measured by net income. In addition, we analyzed whether discretionary accruals measured by gross income have complementary information to cash holdings, impacting value relevance. The results demonstrated that discretionary accruals measured by gross income influences value relevance and, the results are sensitive to the context of IFRS adoption. For discretionary accruals measured by net income, we did not find significant results. Additional findings suggest that in context of better accounting quality, the information related to gross income became more reliable, being a better way to predict future performance of firms than cash holdings. In general, this thesis seeks to contribute to literature demonstrating that the adoption of IFRS standards influences the relations between cash holdings, accounting quality and cost of capital in Latin American countries, emerging fruitful insights for future research.