The Unintended Consequences of IFRS 9 on CVC Investments: Evidence From China
研究了中国企业采用IFRS 9后，用公司风险投资替代被取消的可供出售金融资产，并利用公允价值计量进行盈余操纵的现象。
This study investigates the unintended consequences of the new classification and measurement of equity financial assets following International Financial Reporting Standard 9 (IFRS 9) adoption on corporate venture capital (CVC) investments. Using a sample of Chinese companies, we find that firms substitute available-for-sale (AFS), eliminated under IFRS 9, with CVC, suggesting a shift in firms’ equity investment strategies. We also find that CVCs are positively associated with the “profit or loss due to fair value changes” account balance post-IFRS 9, particularly for firms with strong incentives to manage earnings, indicating that the discretion in fair value measurement of the underlying portfolio firms of CVCs may be used for earnings manipulations. This conclusion is further supported when we find that the relationship disappears when a new delisting regulation weakens firms’ incentives to maintain positive net income. Collectively, our study indicates that IFRS 9 creates unintended consequences on CVC investments.