The value relevance of banking loans: a comparison between IFRS 9 and IAS 39 on a European sample

The aim of this paper is to test the value relevance of IFRS 9, in com-parison to its predecessor, the IAS 39 accounting standard, both on an overall and bank loans level. In order to do this, we investigate on a sample of 139 European banks. Results highlight that both principles are shown to be value relevant. However, the introduction of IFRS 9 can be linked with an increased ability to explain market stock price compared to IAS 39, but exclusively at the individual loans level. Moreover, the significance of this finding is comparatively better when considering equity-strong countries. Inside this framework, the classic Net income information is price relevant only within the EU 15 countries, as well as in the aforementioned equity-strong countries. This indicates that net income can be deemed as value-relevant only in countries where accounting standards are applied in a more accurate way, as well as where more value relevance is considered more im-portant by investors.