INTERNATIONAL FINANCIAL REPORTING STANDARDS AND FIRM’S VALUE RELEVANCE IN TEXTILE SECTOR OF PAKISTAN

Farah Naz Kanwal Humayun, Tooba Lutfullah, and Anam Tariq

Abstract

Value relevance is the capacity of information revealed by financial statements to capture and review firm value. Moreover, International Financial Reporting Standards (IFRS) ensures better, precise, timely and appropriate financial statement data, comparative to the home standards applied for exposed financial reporting in many countries applying them,
including Pakistan. This study is based on the IFRS impact on value relevance of the textile sector of Pakistan where 30 listed companies of Pakistan on Karachi stock exchange for the period of 2015-2021 have been taken. Panel regression technique is used to analyze the impact of IFRS on value relevance. IFRS is used as an independent dummy variable and other
independent variable includes Profitability, Size and Growth. The results indicates that the independent variables of size, profitability, growth have the significant relation with value relevance however the IFRS impact is insignificant to the value relevance that is measured by earning per share. This research will help the company’s management to understand the value relevance concept and its impact on the company. This research would help in exploring the influence of IFRS on financial reporting quality since earnings quality is an important quality of the firms value.
Keywords: IFRS, value relevance, textile sector, Karachi Stock Exchange (KSE), Earnings per share (EPS)