CHAPTER 4 RESULTS AND DISCUSSION
4.2 Hypotheses testing
4.2.3 Test for the third hypothesis
Means and frequency distributions of benefit items
Responses to the expected benefits of applying IFRSs for enterprises, investors, nation, and accountants and auditors were illustrated in Tables 4.12. The answers of the respondents’ scores were measured on a five-point Likert scale from 1 “strongly disagree” to 5 “strongly agree”. The higher the score, the more the respondents agreed with the statement; the lower the score, the more the respondents disagreed with the statement. The following depicted the mean values and frequencies of responses. The mean scores of expected benefit items: “greater reporting transparency”, “create a common accounting language around the world” and "enhance national reputation as being in compliance with International Standards" ranked the highest (mean correlatively equal 4.34, 4.34 and 4.3), and the mean score of item “ lower cost of capital” ranked the lowest (mean = 2.76).
64
Firstly, expansion of analyzing the expected benefits of applying IFRSs for enterprises, on average the respondents agreed with the proposition that applying of IFRSs would result in: (1) easier access to capital (mean = 3.48, most frequent answer was agree with 40.2%), (2) better comparability with other businesses (mean = 3.15, most frequent answer was agree with 34.4%), (3) greater reporting transparency (mean
= 4.34, most frequent answer was strongly agree with 45.9%), and (5) improved quality and timeliness of management information (mean = 3.28, most frequent answer was undecided with 37.7%). The statements that the respondents disagreed with (or were undecided about) the most were: (1) lower cost of capital (mean = 2.76, most frequent answer was disagree with 38.5%), and (2) reduce reporting transform cost (mean = 3.07, most frequent answer was disagree with 33.6%).
The lack of agreement with the proposition that using IFRSs will lower the cost of capital and reduce reporting transform cost is different from the statement of Sir David Tweedie, Chairman of The IASB about benefits of global accounting harmonization (Tweedie, 2006). These results may come from the characteristics of Vietnam's economy as comments made by Prof. Dang Van Thanh indicated that Vietnam has the socio-economic conditions which differ from those of other countries.
The stock market of Vietnam is in the early stages of the development process, the equalization process has been growing in momentum for 15 years, and thus using IFRSs is not producing the benefit of lowering the cost of capital in Vietnam.
65
Disagree Disagree Undecided Agree Strongly Agree
4. Reduce reporting transform cost 3.07 .831
.408
5. Greater reporting transparency 4.34 20.489
.000***
6. Improved quality and timeliness of management
information 3.28
1. Easier compare the financial results of companies
operating in different jurisdictions 4.01 .00013.960 *** 1
2. Increase transparency the enterprise to reduce the
investment risks 3.98 .00015.991 *** 1
(0.8%) 26
(21.3%) 70
(57.4%) 25
(20.5%)
3. Increase cross-border listings and investment
opportunities 3.12 1.430 .155 (3.3%) 4 (22.1%) 27 (41%) 50 (26.2%)32 (7.4%) 9
66
Benefits for nation mean Item
Test Value = 3
Strong
Disagree Disagree Undecided Agree Strongly Agree t
(Sig.)
1. Enhance national reputation as being in compliance
with International Standards 4.30
20.085
2. Help to attract more foreign investments 4.13 19.857
.000*** 1
3. Easier access to loans and capital from international
organizations 3.20
4. Reduce the cost of accounting standards development
and maintenance 3.28
5. Create confidence for investors, contributing to the
development of stock market 3.74
10.743
Benefits for accountants and auditors
1. Create a common accounting language around the
world 4.34
3. Standardize training and better assure the quality of
their work on a global basis 4.12
4. Easier sell their services in different countries 4.07 17.704
.000*** 23
Values used: Strongly Disagree - 1; Disagree - 2; Undecided - 3; Agree - 4; Strongly Agree - 5.
Note: ** , *** indicate significance at the 0.05, and 0.01 levels, respectively.
67
Besides, look at the top 20 foreign investors in Vietnam from 1990 to 2010. Five of the biggest countries are Taiwan, Korea, Singapore, Japan, and Malaysia (Figure 4.1) in which Singapore convergence IFRSs in 2007, Japan adopts it in 2011, and others Taiwan, Korea, and Malaysia will apply IFRSs in 2012. So at this time the demand to prepare financial statements under IFRSs of foreign companies which use FDI in Vietnam shows that it is not yet a pressing and necessary requirement. This is one reason why we have a lack of agreement with the proposition that using IFRSs will reduce reporting transform cost in Vietnam.
Figure 4.1 FDI in Vietnam from 1990 - 2010[8]
Next, we continue the analysis in benefits for investors that on average the respondents agreed with the proposition that applying of IFRSs would result in: (1) easier compare the financial results of companies operating in different jurisdictions (mean = 4.01, most frequent answer was agree with 50.8%), (2) increase transparency the enterprise to reduce the investment risks (mean = 3.98, most frequent answer was agree with 57.4% ), and (3) increase cross-border listings and investment opportunities (mean = 3.12, most frequent answer was undecided with 41%). There are no statements that the respondents disagreed with.
8 http://www.vietpartners.com/Statistic-FDI.htm
68
Of those who responded to the statement that using IFRSs will easier compare the financial results of companies operating in different jurisdictions, people often invest in the stock market showed a higher agreement (mean = 4.45) than people sometime (mean = 4.12) and never (mean = 3.64) invest in the stock market (Table 4.13). A one way ANOVA with Scheffe test suggested a significant difference between levels of investment in how agree with this benefit.
Note: (N&S) means never & sometimes; (N&O) means never & often; *** indicates significance at the 0.01 level.
Thirdly, evaluation of the statement about the benefits of using IFRSs for Vietnam as nation, Table 2.12 shows on average the respondents agreed with the proposition that applying of IFRSs would result in all of items including: (1) enhance national reputation as being in compliance with International Standards (mean = 4.30 with 88.5% of respondents reported strongly agree or agree), (2) help to attract more foreign investments (mean = 4.13, with 87.7% of respondents reported strongly agree or agree), (3) easier access to loans and capital from international organizations (mean = 3.20, most frequent answer was undecided with 41%), (4) reduce the cost of accounting standards development and maintenance (mean = 3.28, most frequent answer was undecided with 25.4%, agree or strongly agree with 45.9%), and (5) create confidence for investors, contributing to the development of stock market (mean = 3.74, with 64.7% of respondents reported strongly agree or agree).
Finally, in terms of benefits of using IFRSs for accountants and auditors, on average the respondents agreed mostly with: (1) create a common accounting language around the world (mean = 4.34 and most frequent answer was strongly agree with
Table 4.13
The Relationship between Level of Investment and Expected Benefit for Investor – An ANOVA analysis
69
48.4%), (2) standardize training and better assure the quality of their work on a global basis (mean = 4.12 and most frequent answer was agree with 58.2%), (3) accountants and auditors become more competitive (mean = 4.11 and most frequent answer was agree with 68.9%), (4) easier sell their services on different countries (mean = 4.07 and accountants and auditors become more competitive (mean = 4.11 and most frequent answer was agree with 55.7%), and (5) create a global network of accountants and auditors (mean = 3.75 and most frequent answer was agree with 50%). There is no statement which on average the respondents tend to disagree.
Test for third hypothesis
In this part, we test the third hypothesis – namely, the benefits of applying IFRSs in Vietnam are clear. The third column of Table 4.12 provides the results of one sample t-test analysis of how respondents agree about expected benefits of applying IFRSs. In which the sixteen (84.2%) of total 19 benefit items have statistically significantly different from the test value of 3 (p < 0.05). The three items are not accepted that are two benefits for enterprises: (1) “better comparability with other businesses”, and (2) “reduce reporting transparency”, and one benefit for investors that
“increase cross-border listings and investment opportunities”.
Furthermore, the findings of this test was suggested that only a benefit for enterprises is “using IFRSs will have lower cost of capital” have a negative T-value (t-value = -2.831, sig. <.001). It means that the sample has a significance lower mean on the evaluation of this benefit than 3 “undecided”. So the benefit that "using IFRSs will have lower of capital” is not clear in Vietnam.
Other benefits (including three benefits for enterprises, two benefits for investors, five benefits for nation and five others for accountants and auditors) have a positive T-value with the significant 2-tailed less than the alpha level of significance of 0.05. It means that the sample has a significance higher mean on the evaluation of these benefits than 3 “undecided”. Or in other words, the respondents evaluated these fifteen (78.95%) benefit items are clear in Vietnam. Interestingly, all benefits of using IFRSs for accountants, auditors, and nation were explored and presented in the literature review which have a higher agreed as the expected benefits in Vietnam.
70
Finally, the four expected benefits were evaluated as “not clear” by the way respondents disagreed with (or were undecided about) them. However, when we calculate the average mean of all expected benefit items, the result is 3.697. This number means that, in general, the respondents tend to agree with the expected benefits of applying IFRSs. Base on these findings above, the main hypothesis – namely, “the benefits of applying IFRSs in Vietnam are clear” is accepted.
Logistic Regression
A chi-square statistic are use to test for independence between the approach to be chosen for applying IFRSs and the expected benefits of the using IFRSs. We expected that the answers to these two sets of questions would not be independent. In addition, a logistic regression statistics is applied to measure the direction of the association between these responses. The assumption that the approach to apply IFRSs is assigned 1 means convergence, 0 means adoption. As described above, expected benefits of using IFRSs were measured on the five-point Likert scale. The following is discussed the results of the logistic regression models.
First of all, the results reported in Table 4.14 confirm our expectations. The probability of the chi-square test statistic (chi-square = 31.295) was p < 0.01, less than the alpha level of significance of 0.05. It means that the way to be chosen for applying IFRSs is no independence with the expected benefits for enterprises. In other words, the model is statistically significant which represented in the following:
WAY = 1.138 + 0.357*eEATC + 0.777*eLCOC + 0.364*eBCWO – 0.758*eRRTC – 0.856 * eGRT + 0.479 * eIOATOMI
For almost all benefits in this model, the measures of association we used show discordant observations, that is, a higher ranking on one variable is accompanied by a way to apply IFRSs. The highest positive correlation is observed for benefit proposition that lower cost of capital (b2 = 0.777, p = 0.24). This means respondents who more agreed with this statement, who more tend to convergence IFRSs. While the highest negative correlation is observed for statement that greater reporting transparency (b5 = - 0.856, p = 0.46) which means respondents who more agreed with using IFRSs will greater reporting transparency, who more tend to adoption IFRSs. Similarly, respondents who more agreed with benefit that reduce reporting transform cost, also
71
more tend to adoption IFRSs (4 = - 0.758, p = 0.08). Nevertheless, there are positive correlations are observed for propositions 1, 3, and 6 but the correlation is very weak.
Finally, the overall percent of cases are correctly predicted with 81.9 % for the full model.
Table 4.14
Tests of Independence and Association between the Ways to Apply IFRSs and the Expected Benefits for Enterprises
WAY = α + b1 * eEATC + b2 * eLCOC + b3 * eBCWO + b4 * eRRTC +b5 * eGRT + B6 * eIOATOMI
Benefit factors B S.E. df Sig.
1 eEATC .357 .298 1 .232
2 eLCOC .777 .345 1 .024**
3 eBCWOB .364 .257 1 .156
4 eRRTC -.758 .287 1 .008***
5 eGRT -.856 .428 1 .046**
6 eIQATOMI .479 .313 1 .127
Constant 1.138 2.022 1 .574
Chi-square 31.295***
Overall percentage 81.9 %
Note 1 :** , *** indicate significance at the 0.05, and 0.01 levels, respectively.
Note 2: WAY equal 1 means convergence, 0 means adoption.
Note 3: Benefit factors included benefits for enterprises which eEATC means easier access to capital, eLCOA means Lower cost of capital, eBCWOB means better comparability with other businesses, eRRTC means reduce reporting transform cost, eGRT means greater reporting transparency, and eIQATOMI means improved quality and timeliness of management information.
Secondly, the results in Table 4.15 represent the association between the way to apply IFRSs and the expected benefits for investors. It shows the probability of the chi-square test statistic (chi-chi-square=31.406) was p<0.01, less than the alpha level of significance of 0.05. It means that the way to be chosen for applying IFRSs is no independence with the expected benefits for investors. In other words, the model in the following is statistically significant:
WAY = 8.446 -1.709 * iECTFROCOIDJ - 0.474* iITTETRTIR + 0.525 * iICLAIO
72
For three independent variables in this model, the highest positive correlation is observed for benefit proposition that increase cross-border listings and investment opportunities (b3 = .525, p = 0.047). This means respondents who more agreed with this statement, who more tend to convergence IFRSs. However, the difference between respondents who tend to convergence and respondents who tend to adoption in evaluating this proposition is not so much which responses tend to convergence (mean = 3.23, mode = 3) vs. responses tend to adoption(mean = 2.9, mode = 2). While the highest negative correlation is observed for statement that easier compare the financial results of companies operating in the different jurisdictions (b1 = - 1.709, p = 0.46).
This means respondents who more agreed with the expected benefit as easier compare the financial results of companies operating in the different jurisdictions, who more tend to adoption IFRSs. Also, there are negative correlations are observed for propositions as increase transparency the enterprise to reduce the investment risks but the correlation is very weak. Finally, the overall percent of cases are correctly predicted with 80.2 % for the full model.
Table 4.15
Tests of Independence and Association between the Ways to Apply IFRSs and the Expected Benefits for Investors
WAY = α + b1 * iECTFROCOIDJ + b2 * iITTETRTIR + b3 * iICLAIO
Benefit factors B S.E. df Sig.
iECTFROCOIDJ -1.709 .421 1 .000***
iITTETRTIR -.474 .441 1 .283
iICLAIO .525 .264 1 .047***
Constant 8.446 2.184 1 .000***
Chi-square 31.406***
Overall
percentage 80.2 %
Note 1: *** indicates significance at the 0.01 level.
Note 2: WAY equal 1 means convergence, 0 means adoption.
Note3: Benefit factors included benefits for investors which iECTFROCOIDJ means easier compare the financial results of companies operating in the different jurisdictions, iITTETRTIR means increase transparency the enterprise to reduce the investment risks, and iICLAIO means increase cross-border listings and investment opportunities.
73 Table 4.16
Tests of Independence and Association between the Ways to Apply IFRSs and the Expected Benefits for Nation
WAY = α + b1 * nENRABICWIS + b2 * nHTAMFI + b3 * nEATLACFIO + b4 * nRTCOASDAM +b5 * nCCFICTTDOSM
Benefit factors B S.E. df Sig.
1 nENRABICWIS -.170 .396 1 .668
2 nHTAMFI -.204 .448 1 .649
3 nEATLACFIO -.272 .333 1 .414
4 nRTCOASDAM -1.421 .340 1 .000***
5 nCCFICTTDOSM 1.095 .425 1 .010**
Constant 4.608 1.962 1 .019**
Chi-square 41.968***
Overall Percentage 80.2 %
Note 1: ** , *** indicate significance at the 0.05, and 0.01 levels, respectively.
Note 2: WAY equal 1 means convergence, 0 means adoption.
Note 3: Benefit factors included benefits for nation which nENRABICWIS means enhance national reputation as being in compliance with the International Standards, nHTAMFI means help to attract more foreign investments, nEATLACFIO means easier access to loans and capital from international organizations, nRTCOASDAM means reduce the cost of accounting standards development and maintenance, and nCCFICTTDOSM means create the confidence for investors, contributing to the development of stock market.
Next, Table 4.16 presents the relation between the way to apply IFRSs and the expected benefits for nation. The same results is found in the chi-square test statistic is 31.406 with p < 0.01, less than the alpha level of significance of 0.05. It means that the way to be chosen for applying IFRSs is no independence with the expected benefits for nation. Base on these findings, the model in the following is statistically significant:
WAY = 4.608 - 0.170 * nENRABICWIS - 0.204 * nHTAMFI - 0.272* nEATLACFIO - 1.421* nRTCOASDAM + 1.095 * nCCFICTTDOSM
The model shows only one positive correlation for the proposition that creates the confidence for investors, contributing to the development of stock market (b5 = 1.095, p= 0.019). This means respondents who more agree with this expected benefit,
74
who more tend to convergence IFRSs. While other correlations are negative in which the highest negative correlation is observed for statement that reduce the cost of accounting standards development and maintenance (b4 = -1.421, p = 0.01). This means respondents who more agreed with using IFRSs reduce the cost of accounting standards development and maintenance, who more tend to adoption IFRSs. With other variables, there are insignificant results are found for the correlation. In summary, the result suggests that the overall percent of cases are correctly predicted with 80.2 % for the full model.
Table 4.17
Tests of Independence and Association between the Ways to Apply to IFRSs and the Expected Benefits for Accountants and Auditors
WAY = α + b1 * aCACALATW + b2 * aANABMC + b3 * aATABATQ + b4 * aESTSIDC +b5 * aCTGNOAAA
Benefit factors B S.E. df Sig.
1 aCACALATW -.254 .401 1 .526
2 aANABMC .498 .499 1 .319
3 aATABATQ -1.130 .493 1 .022**
4 aESTSIDC -1.237 .450 1 .006***
5 aCTGNOAAA .737 .358 1 .039**
Constant 7.154 2.446 1 .003***
Chi-square 23.791 ***
Overall Percentage 78.4 %
Note 1: ** , *** indicate significance at the 0.05, and 0.01 levels, respectively.
Note 2: WAY equal 1 means convergence, 0 means adoption.
Note 3: Benefit factors included benefits for accountants and auditors which aCACALATW means create a common accounting language around the world, aANABMC means accountants and auditors become more competitive, aATABATQ means standardize training and better assure the quality of their work on a global basis, aESTSIDC means easier sell their services in different countries, and aCTGNOAAA means create the global network of accountants and auditors.
Finally, Table 4.17 shows the correlation between the way to apply IFRSs and the expected benefits for accountants and auditors. A chi-square test statistic was significant (X2 = 23.791, p < 0.01) which means that the way to be chosen for applying
75
IFRSs is no independence with the expected benefits of using IFRSs for accountants and auditors. So the model in the following is statistically significant:
WAY = 7.154 - 0.254* aCACALATW + 0.498* aANABMC - 1.130* aATABATQ - 1.237 * aESTSIDC + 0.737 * aCTGNOAAA
The model indicated the highest positive correlation for the proposition that create the global network of accountants and auditors (b5 = 0.737, p= 0.039). This means respondents who more agree with this statement, who more tend to convergence IFRSs. While the highest negative correlation is observed for proposition that easier sell their services in different countries (b4 = -1.237, p = 0.06). This means respondents who more agreed that by using IFRSs, accountants and auditors will easier sell their services in different countries, who more tend to adoption IFRSs. Similarly, respondents who more agreed with benefit that standardize training and better assure the quality of their work on a global basis, also more tend to adoption IFRSs (b3 = - 1.13, p = 0.06).
However, no significant results are found for other variables. Finally, the overall percent of cases are correctly predicted with 78.4 % for the full model.