Download or read book IFRS and European Commerical Banks written by Athanasios Dimos and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 2005 was a landmark year in the European Union's (EU) financial reporting history as all EU listed firms were required to switch from national accounting standards to IFRS. Using a sample of European commercial banks, this study explores two research questions within the framework of equity valuation theory: (i) whether the disclosed fair value estimates of loans and advances; held-to-maturity investments; deposits; and other debt, as well as the recognition of derivatives at fair value, are value relevant, (ii) whether the adoption of IFRS led to a reduction in European banks' cost of equity capital. The results show that the fair value of loans and advances and other debt are value relevant as is the recognition of derivatives at fair value. Further analysis revealed that the relevance of fair value of loans and derivatives is contingent on banks' financial health and earnings variability, respectively, as well as on the ability of countries to enforce IFRS. The findings also indicate that the cost of equity capital of European commercial banks decreased after the adoption of IFRS. However, banks domiciled in countries with continental accounting standards and weak enforcement rules experienced a greater reduction in their cost of equity capital.