What drives value relevance? The visibility effect in the adoption of a new accounting standard

This article contributes to the literature on the reasons that drive changes in financial information value relevance after the issuance and implementation of a new accounting standard. Currently, value relevance changes are explained through the lens of the reporting location literature, which points to the increased transparency of the reports as the main driver of value relevance increases. We empirically analyse the changes in the value relevance of other comprehensive income (OCI) after the issuance of IAS 1 Revised in continental Europe, and we discuss the role of visibility of accounting standards (the visibility effect) in explaining value relevance changes. We also test whether firm size and the regulatory quality of the country in which a company is listed drive the results. This study may be of interest to investors and standard setters, given the role that they play in increasing the environment of information. One of the implications of the visibility effect hypothesis is for standard setters to pay more attention to the way standards are communicated and made public to market participants.