The impact of mandatory adoption of the international financial reporting standards on the cost of equity: evidence from Angolan Banks

Abstract

In 2016, the Angolan banking sector mandatorily adopted the International Financial Reporting Standards (IFRS). Its effects on the cost of equity, exceedingly high in Angolan banks and a key variable to attract investors, are controversial, with some literature suggesting it decreases after the adoption. This paper examines the impact of mandatory IFRS adoption on the cost of equity, in Angolan banks in the period 2012-2016. The results show that the adoption of IFRS is not relevant in explaining the cost of equity, on the short-term, contrary to other company-specific variables, such as size, leverage, ROA, auditors’ opinion and ownership concentration.