Examination of the Effects of the Transition on IFRS Based on the Du-Pont Analysis

In the course of our research, we examined the value judgment of investors of companies switching to IFRS in the two accounting systems.Before examining the hypothesis (H1), it was justified to examine the evolution of the ROE indicator in the two different accounting systems using the Wilcoxon rank sum test.For the ROE indicator, a significant difference can be clearly established in the two accounting systems, as the significant relationship can be demonstrated both in companies with low and high capital requirements.Overall, in the IFRS, the converting companies showed a more favorable profitability situation with regard to the ROE indicator.The main investigation of our research focused on whether the significant deviation of the ROE indicator in the year of the transition can really be attributed to the transition to IFRS.The hypothesis (H1) was tested using a random effects panel regression model.The profitability ratio that most determines investors' value judgment is the ROE indicator.With the help of the study, we can get an answer to the question of whether the ROE indicator changed as a result of the transition to IFRS or due to the direct effect of other indicators in the year of the transition.Our aim is to investigate which variable significantly influences the development of the ROE indicator.In the course of the investigation, based on the correlations of the Du-Pont formula, in addition to transition, the ROS indicator, the turnover rate of all assets, and the equity multiplier were included in the regression model as explanatory variables.Based on the results of the random effects panel regression, the change in the ROE indicator in the year of the transition is not caused by the transition to IFRS in companies with high or low capital requirements.Based on the results of the regression model, the significant difference is closely related to the differences in the rotation speed of all assets and the ROS indicator.Based on this, we determined that the transition to IFRS certainly does not distort the investor value judgment of companies applying IFRS.