Value Relevance of Accounts Receivable Factoring and Its Impact on Financing Strategy under the K-IFRS after COVID-19 from the Perspective of Accounting Big Data

This study investigates whether recognized accounts receivable (AR) factoring is more value relevant than disclosed AR factoring. After the adoption of the Korean International Financial Reporting Standards (K-IFRS), AR factoring is recognized as short-term debt, thus increasing firms’ leverage rati...

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Bibliographic Details
Published in:Sustainability 2020-12, Vol.12 (24), p.10287
Main Authors: Park, Jung Min, Lee, Hyoung Yong, Park, Sang Hyun, Han, Ingoo
Format: Article
Language:English
Subjects:
Accounting
Accounts receivable
Artificial intelligence
Automation
Big Data
Coronaviruses
COVID-19
Debt financing
Debt management
Derivatives
Economics
Equity
Global economy
Hypotheses
International Financial Reporting Standards
International standards
Investments
Liability
Market value
Medical research
Pandemics
Risk assessment
Securitization
Special purpose entities
Sustainability
Valuation
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Summary:This study investigates whether recognized accounts receivable (AR) factoring is more value relevant than disclosed AR factoring. After the adoption of the Korean International Financial Reporting Standards (K-IFRS), AR factoring is recognized as short-term debt, thus increasing firms’ leverage ratio. Using cross-sectional equity valuation regressions, we find that recognized AR factoring is value relevant, unlike disclosed AR factoring. Moreover, the market value of equity and AR factoring are more significantly correlated in highly leveraged firms than in less-leveraged ones. Accounting data are important from the perspective of big data. In the accounting industry as well, professionals started realizing the implications of big data. The COVID-19 pandemic has created a health crisis and wreaked havoc in an already-fragile global economy. Although there is no way to predict exactly what the economic damage from the COVID-19 pandemic will be, there must be widespread agreement that it will have severe financial impact on every company. Global financial markets have suffered dramatic falls due to the pandemic, and highly leveraged companies are in serious need of financing. While diving deeper, sound debt management and debt transparency are critical to ensure debt sustainability. Thus, companies would be willing to use AR factoring in order to overcome this financial status. This study also shows that highly leveraged firms decrease AR factoring after K-IFRS adoption.
ISSN:2071-1050
2071-1050
DOI:10.3390/su122410287