Literature Review: Foreign Currency Reaction

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2. Literature Review and Hypothesis Development 2.1 Risk Disclosure—Degree of Compliance with IAS 21 Foreign currency transaction (IAS, 2011) refers to an economic event (buying and selling goods or services, borrowing and lending money, depositing assets, or settling liabilities), that requires settlement in a currency other than the local currency of the country in which the financial institution or bank is located. While translation of foreign currencies involves converting accounting numbers from one currency into another currency for financial reporting purposes, Huang & Vlady (2012) suggest that corporations can either convert foreign currency from international trade in financial reports, or translate foreign operations and currencies…show more content…
They added that disclosure helps market participants assess the amount, timing, and risk related to their investments. Emm et al. (2007) argued that increasing the ability of the company to have an access to capital markets, enhancing the attractiveness of the company’s shares to investors by reducing the costs of information gathering, increasing the liquidity of the company’s securities, and reducing the cost of raising capital are the man advantages of risk disclosure.Berger and Hahn (2003) confirmed the argument that risk disclosure a choice variable set by management in spite of being…show more content…
(1984),Chow and Wong-Boren (1987),Cooke (1991&1992), Hossain et al. (1994),Meek et al. (1995), Watson et al. (2002),Akhtaruddin (2005), Abraham and Cox (2007), and Souissi and Khlif (2012). The literature on accounting policy choice suggests many variables may affect company risk disclosure. Popova (2013) pointed out that disclosure is twofold. According tothatstudy, mandatory disclosure occurs when disclosing certain elements of information is required by regulations,while voluntary disclosure occurs when the disclosure of more information than required because of the interest of the company, such as improving the reputation of the company, reducing political and regulation intervention in addition to enhancing the stock liquidity (Entwistle, 1997).Firth (1979), McKee et al. (1984),Owusu-Ansah (1998), Gray and Roberts (1991),Watson et al. (2002),and Souissi and Khlif (2012) argued that large firms are generally more visible and have greater social power than small ones. Therefore, the current study expects the degree of compliance with IAS 21 and consequently, risk disclosure by large companies (measured in terms of total assets and total revenues) to be greater than that

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