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Measuring Investors' Reaction to the Adoption of International Financial Reporting Standards in Greece, Using a Market-Based Model

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  • Athanasios Vazakidis
  • Stergios Athianos

Abstract

Problem statement: The aim of this study is to highlight the main differences between International Accounting Standards and Greek accounting, The sample constituted by 90 randomly selected Greek companies which are listed in Athens Stock Exchange were scrutinized concerning the differences in financial figures which have been appeared due to the adoption of IFRS. Approach: The use of capital asset pricing model has been inserted in a single regression model in order to depict the association of risk and the actual price return. The first model has been changed in order to exclude variables that were not statistically significant for the analysis. Finally, a revised model has been constructed and its statistically predictive power has been reexamined. Results: The outcome of the study postulates that when investors take into consideration the risk profile of each company, the differences in the valuation, current assets, current liabilities and sales can predict the share prices within a period of six months. Finally, there is evidence that the differences in valuation of the above companies, along with the classic CAPM can explain the fluctuations in share prices concerning the examined period. Conclusion: Since the field of Investigation is Greece, the research provided key differences between the old Greek conservative accounting and the fair value accounting of IFRS using a mixture of studies, the current paper has proved that the switch of the accounting regime from Greek accounting to IFRS has affected the valuation of companies. The above difference in the valuation has been taken into consideration by investors to readjust their portfolios.

Suggested Citation

  • Athanasios Vazakidis & Stergios Athianos, 2010. "Measuring Investors' Reaction to the Adoption of International Financial Reporting Standards in Greece, Using a Market-Based Model," American Journal of Economics and Business Administration, Science Publications, vol. 2(1), pages 103-112, March.
    • Handle: RePEc:abk:jajeba:ajebasp.2010.103.112
    DOI: 10.3844/ajebasp.2010.103.112
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    References listed on IDEAS

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    1. Holger Daske, 2006. "Economic Benefits of Adopting IFRS or US‐GAAP – Have the Expected Cost of Equity Capital Really Decreased?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(3‐4), pages 329-373, April.
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    3. Holger Daske, 2006. "Economic Benefits of Adopting IFRS or US-GAAP - Have the Expected Cost of Equity Capital Really Decreased?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(3-4), pages 329-373.
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    9. Harris, Mary S. & Muller III, Karl A., 1999. "The market valuation of IAS versus US-GAAP accounting measures using Form 20-F reconciliations1," Journal of Accounting and Economics, Elsevier, vol. 26(1-3), pages 285-312, January.
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    Cited by:

    1. Panayotis Manganaris & Jordan Floropoulos & Irini Smaragdi, 2011. "Conservatism and Value Relevance: Evidence from the European Financial Sector," American Journal of Economics and Business Administration, Science Publications, vol. 3(2), pages 259-269, April.
    2. William Forbes & George Giannopoulos, 2015. "Post-Earnings Announcement Drift in Greece," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 18(03), pages 1-20.

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