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Capital market effects of mandatory IFRS 8 adoption: An empirical analysis of German firms

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  • Franzen, Nina
  • Weißenberger, Barbara E.

Abstract

In this paper, we analyze capital market effects associated with the mandatory adoption of IFRS 8 for a sample of German firms. Our research is motivated by the change in segment reporting rules due to the adoption of the management approach resulting from the IASB and FASB short-term convergence project. In particular, we use a difference-in-differences design to investigate whether firms applying IFRS 8 experience a decrease in information asymmetry and/or an increase in forecast accuracy. We document no significant decline in information asymmetry, measured by bid-ask spreads and depths, and no significant increase in forecast accuracy, measured by forecast errors, between the pre and post IFRS 8 periods for mandatory adopters relative to a group of control firms. Thus, we find no unique effects of the mandatory adoption of IFRS 8 for German firms. Our results indicate that adopting supposed US ‘best practice’ might not necessarily be the best choice for every IFRS-applying country. Our findings should be of interest to the IASB, which finished its post-implementation review of IFRS 8 in 2013 and is currently considering potential changes to IFRS 8.

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  • Franzen, Nina & Weißenberger, Barbara E., 2018. "Capital market effects of mandatory IFRS 8 adoption: An empirical analysis of German firms," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 31(C), pages 1-19.
    • Handle: RePEc:eee:jiaata:v:31:y:2018:i:c:p:1-19
    DOI: 10.1016/j.intaccaudtax.2017.11.002
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    Cited by:

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    3. Solomon Opare & Muhammad Nurul Houqe & Tony van Zijl, 2021. "Meta‐analysis of the Impact of Adoption of IFRS on Financial Reporting Comparability, Market Liquidity, and Cost of Capital," Abacus, Accounting Foundation, University of Sydney, vol. 57(3), pages 502-556, September.
    4. Aust, Viktoria & Pelger, Christoph & Drefahl, Christian, 2021. "Exploring the relationship between valuation and stewardship uses of accounting information: Empirical evidence from German listed firms," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 42(C).
    5. Eduardo Flores & Marco Fasan & Wesley Mendes‐da‐Silva & Joelson Oliveira Sampaio, 2019. "Integrated reporting and capital markets in an international setting: The role of financial analysts," Business Strategy and the Environment, Wiley Blackwell, vol. 28(7), pages 1465-1480, November.
    6. Barniv, Ran R. & Myring, Mark & Westfall, Tiffany, 2022. "Does IFRS experience improve analyst performance?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 46(C).

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    More about this item

    Keywords

    Segment reporting; IFRS 8; IAS 14R; Information asymmetry; Forecast accuracy; Difference-in-differences design;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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