The Value Relevance of the Proposed New Leasing Standard. An event study of the European Stock Markets’ Reaction to the proposed replacement of IAS17.

Abstract

Background and Problem Discussion: Due to companies large off-balance sheet obligations, discussions of the current standard regarding leasing, IAS 17, have provided suggestions to a new leasing standard, which is the foundation for this thesis. Purpose and Research Question: The purpose of this study is to examine if the implementation of a new leasing standard could have an effect on the market value of firms. The research question is: Do investors find the replacement of IAS 17 value relevant? If so, is the value relevance more prominent in certain industries or related to the size of the company? Methodology: In order to fulfil the purpose, an Event Study is performed. Data collection is primarily performed through DataStream and analysis of the data is performed in Stata. Results and Conclusion: The empirical findings in this study suggest no general effect on value relevance regarding the new standard. No significant results are found within different industries. However, considering companies of different size, significant results are found. The general conclusion is therefore that size is probably a variable that is value relevant to investors considering the replacement of the new leasing standard.