The Vanishing Role of IFRS Application on the Performance of Saudi Arabian IPO Companies

Abstract

This research investigates the long-term impact of the International Financial Reporting Standards (IFRS) regulation on the performance of Initial Public Offering (IPO) corporations in developing market nations. The research employs 124 IPO companies listed in Saudi Arabia from 2003 to 2019 using Difference-in-Differences (DiD) estimation. It was discovered that enforcing the use of IFRS provides no role on the performance of IPO companies in the long-run. On the secondary market, where there was low information asymmetry, the IFRS did not enhance the aftermarket performance of IPO corporations. The success of the IFRS in creating high-quality financial reporting is dependent on the level of information asymmetry and disappears when analysts and investors have access to an abundance of information about traded enterprises, especially in emerging IPO markets like Saudi Arabia.