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Hamad, Ismail Osman Ahmed (2022) Fair value effect on equity market value, information asymmetry and dividends payment: evidence from the Qatar Stock Exchange. Doctoral thesis, London Metropolitan University.
Fairvalue (FV) accounting aims to provide relevant information on the current values of the firm's assets and liabilities. The issue in the FV academic research is that each research addresses the topic from one angle and/or one sector, mainly the financial sector. Another issue is that researchers deal with FVs in total, ignoring the nature and types of each asset. This research is motivated to address these issues and the relevance of FV to investors.
The research aims to examine the impact of the disclosure of FV changes of assets and liabilities of firms listed on the Qatar Stock Exchange (QE) on equity market value, information asymmetry and dividends payment. QE market has a relatively short history of trading, less rigorous sustainability requirements and tax-free. Thus, generalisability may not apply to all markets. Multiple regression models were used to analyse secondary and primary data.
The results show that the disclosure of certain, but not all, changes in FV is significantly associated with firms' equity market value, information asymmetry and dividends payment. The direction of the association is sector-specific. It depends on whether the FV change is transitory or persistent, whether the asset is a long-term or short-term asset, whether the information is public or private, and the measurement reliability. Reliable or persistent (unreliable or transitory) FV measurements are positively (negatively) associated with firms' equity market value. Mark-to-model measurement represents private information not known to the market and, when disclosed, alleviates information asymmetry. Mark-to-market measurement, however, is public information and hence does not affect information asymmetry. The conclusion on information asymmetry represents a significant contribution of FV accounting towards lessening the adverse selection and agency problems. Finally, persistent FV change on long-term assets is associated with higher dividends payment, while transitory FV change on short-term assets is not. The evidence indicates that FV alleviates information asymmetry and creates value to shareholders - higher equity market value.
These findings serve as evidence in support of the agency theory, efficient market hypothesis theory and investors' rationality. Moreover, the findings provide insights to the policymakers, standards setters and management.
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