- Do Fair Value Adjustments Influence Dividend Policy among Listed Firms. - The author examines how the impact of adjusting the financial asset value at the end of the period on the balance sheet affects the dividend policy of the firms. - The research hypothesis is that the fair value adjustment of financial assets has a positive effect on business results and the board of directors sees good business results normally giving high dividends. - However, the survey of 287 firms listed on the Hochiminh City Stock Exchange has the opposite result, there is a negative relationship between the adjustment of financial asset value and the change of dividend policy. - Author's research indicates that the dividend policy is in line with the downward trend if the firms carries out more than the adjustment of financial asset value. - Utilizing fair values in the measurement of financial assets is becoming increasingly essential, studies have shown that this contributes to improving the quality of financial reporting. - Because then the numbers on the financial report will be more timely, realistic and make a great contribution to the decision making of the manager.. - However, adjusting the financial asset value at fair value results in immediate change in the results of the firms. - BTS: Vicem But Son Cement Joint Stock Company, profit after tax of the first 6 months of 2012 increased 165 billion VND due to adjustment of foreign currency difference at the end of the period.. - It is clear that adjusting the value of financial assets (foreign currency, shares, bonds, capital contributions, receivables. - To examine how fair value accounting affects decision making, the author studies the impact of adjusting the value of financial assets to the company's dividend policy.. - Therefore, whether and how dividend policy is influenced by fair value adjustment is an important empirical question.. - Theoretical Framework Financial assets. - Under IAS 32, IAS 39, Financial Assets comprises four groups:. - Group 1: Financial assets recognized at fair value through profit / loss are financial assets held for trading or initial certified by the firms as belonging to this group. - Financial assets in this group include stocks, bonds, valuable papers traded for a short time to seek profit.. - Group 4: Availables for sale are financial assets not included in the above three groups.. - Financial assets in this group include: foreign currencies, gold and silver, long-term investment. - The classification of financial assets determines the adjustment of the value of financial assets in the financial statements at the end of the period.. - Table 1 will show how the adjustment of financial assets at the end of the period when the financial statements will affect the revenue, income and expenses in the period.. - TABLE 1: ADJUSTING THE VALUE OF FINANCIAL ASSETS OVER THE FINANCIAL STATEMENTS (IAS 39). - basis Impairment Reversibility of impairment Financial assets. - at fair value through profit or loss. - Fair value Profit or Loss Active market price or technique. - Profit or loss Yes, in profit or loss, retricted to the amortised cost at date of impairment No reversal allowed for financial assets which are carried at cost due to the unavailability of fair value. - Fair value (certain exemptions as above). - Thus, in Table 1, we see that, at the end of the period when the financial statement is prepared, the value of the financial assets must be adjusted, the adjustment of the financial asset value will affect the revenue and expenditure in the period of the business that will immediately affect the business results at period.. - Due to the complexity of the IAS32 and the IAS39, IAS 39 is difficult to apply, so the IASB decides to revise IAS 39 and issue new IFRS 9 Financial instruments. - In addition, the presentation of financial instruments and financial assets are also covered in IFRS 7.. - IFRS 9 provides simplicity in the classification of financial assets. - Financial assets are classified according to the business model of the firms to manage the financial assets and the cash flow characteristics under the contract of financial assets. - According to IFRS 9, financial assets are divided into 2 groups:. - Group 1: Amortised cost Group 2: Fair value.. - Table 2 will show us the initial recognition of financial assets at the end of the reporting period and adjustments to the value of financial assets at the end of the reporting period.. - TABLE 2: ADJUSTING THE VALUE OF FINANCIAL ASSETS OVER THE FINANCIAL REPORT (IFRS 9). - Fair value Fair value Other. - Thus, in Table 2, we see that, at the end of the accounting period, financial asset values must be adjusted to reflect the value of financial assets. - That will immediately affect the business results of the reporting period of the firms.. - Due to the fair value of the financial statements, the financial statements have been improved as a result of the fair value of providing timely, reliable information on the current market performance than any other financial accounting standard (Financial Accounting Standards Board, 2000). - Investors will therefore benefit from the application of fair values to measure financial assets because it allows them to make better decisions because of more realistic accounting information (Barth, 2007).. - However, adjusting the fair value of financial assets can lead to large temporary changes in business performance (Penman, 2007).. - Business results show the achievement of the firms after a business cycle. - Lintner (1956) states that companies have the goal of sustaining a stable development of dividends as it relates to the development of the company and its main income. - To determine whether the above statement is true of the business situation or not, the author hypothesizes H2.. - H2: There is a positive relationship between fair value adjustment of financial assets and dividend policy.. - So to check whether fair value accounting affects the decision-making whether or not the author examines the relationship between the dividend policy (affecting the investor's decision) and the outcome trading and adjusting the value of financial assets and other factors through the model as follows:. - Diagram 1: Impact of fair value adjustment of Financial Assets on Dividend Policy Thus, looking at Diagram 1, we see that the dividend policy is influenced by three groups of factors:. - That is the business results of the firm before the adjustment of financial assets at the time of the report. - To measure this factor, the author uses the code number 50 on the Income Statement (gross profit before tax) plus the adjusted portion of financial assets at the end of the period.. - Group of factors: fair value adjustment of financial assets. - This is an adjustment of the value of financial assets at the end of the period preceding the financial statement, which includes the difference between the year-end and the year-end balances of the following indicators on the balance sheet (issued under Curcular No. - 200/2014/TT-BTC dated of the Minister of Finance) (See Table 3).. - Group of factors: the size of the firm. - In order to understand how the size of the firm influences the dividend policy, the author presents a set of factors including total assets and assets in the form of cash for the survey (see Table 3).. - Fair value - a concept that is perceived as embedded in the market - demonstrates future cash flow and reflects the state of the economy - is expected to make accounting information more clear, transparent and relevant for decision making. - However, fair value accounting also included in the Income Statement adjustments made immediately to changes in fair value of financial assets at the end of the period are included in financial expenses. - This can cause a sudden change in the business results of the firm, affecting the opinion of the Board of Directors, investors in the assessment of the performance of firm, distribution policy.. - Hung and Subramanyam (2007) pointed out that the sudden change in business results was due to the adjustment of fair value of financial assets.. - Business results of the firm. - Dividend policy (y) Business result. - Fair value adjustment of financial assets. - Fair value adjustment to the financial assets of the firm 3. - The size of the firm.. - To determine the adjustment level of the financial assets of the author enterprise. - The difference between the period-end and the beginning of the period reflects the reserve on the audited balance sheet of the enterprise.. - At the same time, in order to understand the relationship between the dividend policy this year and the business results of the previous year, the author introduced the data model of two years t and t-1 (similar to Brav et al., 2005). - NIBREV t-1 is the t-1 business result before taking into account the value of financial assets. - This variable is calculated as the pre-tax profit in year t-1 plus (or minus) the total adjusted financial assets at the date of the t-1 end-of-year financial statements. - REV t-1 is the difference between the adjusted financial assets at year end t-1 (calculated based on Table 3).. - Variables are divided by the total assets of the enterprise by year.. - To calculate the norms serving for the quantification of the model according to the equation (1), the author has made the statistics table as follows:. - Provision for trading securities 122 Provision for short-term receivable 137 Provision for long-term receivable 219 Provision for long-term financial assets 254 TOTAL ADJUSTMENT TO FINANCIAL ASSETS. - The equation (1) explores the relationship between this year's profit and last year's profit and the adjustment of the financial asset value in the previous year.. - Δy: change in dividend policy (this variable is calculated by the difference between the dividend yield in year t and the profit in year t-1). - x3: adjustment of financial assets value in year t. - Adjustment of the financial asset value in year t (calculated as the difference between the year-end and year-end balance of the contingent items in the year-end balance sheet). - Variables are divided by the total assets of the enterprise at each reporting date.. - The results of the regression analysis of the correlation between the change in dividend policy and the adjusted level of financial assets are shown in Table 6.. - 200/2014 / TT-BTC dated of the Minister of Finance). - The results show the correlation between the change in dividend policy and the adjusted level of financial assets as shown in Table 6.. - To find the correlation between the adjustment of financial asset value and dividend policy of the business, the author studied the audited financial statements of 287 enterprises listed on the Stock Exchange Ho Chi Minh City in the areas of business in the period 2015-2017. - The author selected enterprises listed on the Ho Chi Minh City Stock Exchange to investigate, get the research writing data because statistics show that this is the floor of many typical businesses, large scale, many sectors The market capitalization ratio is higher than the HNX, while the liquidity of the companies is higher.. - Looking at Table 5, there is an intimate relationship between the after-tax profit of the year and the business results of the previous year (excluding the adjustment of the financial asset value) and the adjustment of the asset value last year's finance.. - Independence variable is NIBREV t-1 as the t-1 business result before taking into account the value of financial assets. - This variable is calculated by the EIT of year t-1 plus (minus) the adjusted total financial assets at the year-end t-1.. - The independent variable REV t-1 is the sum of the difference in the value of financial assets at the end of year t-1.. - So there is a negative relationship between the increase in the value of financial assets and the change in dividend policy. - Thus the H2 hypothesis is rejected, there is a negative relationship between the adjustment of the financial asset value and the change in dividend policy. - The business performance factor of the company this year affects the same direction, proportional to the coefficient 0.07.. - The policy of dividends depends on the business results of the whole year before and this year, in which business results this year have a greater impact on dividend policy.. - Group factors: Adjustment of financial asset value.. - There is no positive relationship between the increase in the value of financial assets and dividend policy.. - However, if the dividend yield is lower than market expectation, it may lead to negative signals on the stock market (Brav et al., 2005) and may damage the reputation of the company and its markets. - Edwards and Mayer (1985) found that managers of the UK's largest companies reduced their dividends as they faced a continuous decline in earnings, suggesting that temporary regulators Business results are not included in distribution of dividends.. - Signs of reducing the dividend policy: On the balance sheet there is an increase of the index: Provision for short-term investment (code 129). - ‘The relevance of the value relevance literature for financial accounting standard setting: another view’. - (2007) ‘How does changing measurement change management behaviour ? A review of the evidence. - ‘The decision usefulness of fair value accounting- a theoretical perspective’. - (2010) ‘Do fair value adjustments influence dividend policy’.. - Journal of Financial Economics, 57(3).
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