The Effect of the IFRS Implementation on the Narrative Part of the Financial Reporting an Investigation of the Greek Banking Sector

Abstract:

Purpose - The research explores the extent to which the implementation of International Financial Reporting Standards (IFRS) in the Greek banking sector has affected its financial and narrative reporting between the periods prior (2002-2004) and after (2005-2007) the implementation of the IFRS. The study analyses the listed banks of Athens Stock Exchange.

Design/methodology/approach – The study is separated in three parts. Firstly, the relation between price, BV and EPS measured on a per share basis between the two periods is examined. Secondly, the change of the narrative reporting quality of the Greek banking sector is studied along with the key financial figure trends between the two periods. Thirdly, the Spearman correlation coefficient is used to assess the relation between the key financial figures and Management Commentary (MC).

Findings – The findings indicate a positive relationship between price, BV and EPS after the adoption of IFRS. In addition, the results highlight that MC has been considerably improved in the same period, while a positive impact in the key financial figures has been observed. Finally, evidence specifies that Debt tends to be the most important indicator of MC.

Practical implications - As the changes in the financial reporting standards reflect also to the narrative part of the financial reports, these changes are important especially for the banks as well as for financial analysts and decision makers.

Originality/value – As proposed by the IASB, The quality of the information provided through the narrative part of the financial reports has been recognized as a vital along with the financial statements for all those interested in estimating a company’s performance.

Keywords: IFRS, financial reporting quality, management commentary, banking sector