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The Impact of International Financial Reporting Standards on Market Microstructure in Europe

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Author Info
M. Lambert
G. Hübner () (HEC Management School - University of Liège)
P.-A. Michel
H. Olivier
Abstract

By focusing on the investors, IFRS disclosure is intended to support economic guidance. The scope of this study is, therefore, to highlight key indicators for value relevance of the IFRS framework. Through a pan-European event study, we first consider the problem of confidence in investments and convergence in opinions. We deepen our analysis through a close examination of the conjoint evolution of three microstructure indicators: market volatility, liquidity, and bid-ask spread. Then, Cusum of squares tests examine whether IFRS disclosure triggered any shifts in beta and alpha on the German and Euronext markets. This study provides some informative insights regarding the ability of the IFRS to convey information supporting a fair intrinsic risk-return profile of investments.

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Publisher Info
Paper provided by CREFI-LSF, University of Luxembourg in its series Working Papers of CREFI-LSF (Centre of Research in Finance - Luxembourg School of Finance) with number 06-02.

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Date of creation: 2006
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Handle: RePEc:crf:wpaper:06-02

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Related research
Keywords: IFRS value relevance; volatility; liquidity; bid-ask spread; risk-return profile; cusum of squares test.;

Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting

References listed on IDEAS
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  1. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March. [Downloadable!] (restricted)
  2. Murphy, Ann B., 2000. "The Impact of Adopting International Accounting Standards on the Harmonization of Accounting Practices," The International Journal of Accounting, Elsevier, vol. 35(4), pages 471-493, 010. [Downloadable!] (restricted)
  3. Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December. [Downloadable!] (restricted)
  4. Milgrom, Paul & Stokey, Nancy, 1982. "Information, trade and common knowledge," Journal of Economic Theory, Elsevier, vol. 26(1), pages 17-27, February. [Downloadable!] (restricted)
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  5. Bessembinder, Hendrik & Chan, Kalok & Seguin, Paul J., 1996. "An empirical examination of information, differences of opinion, and trading activity," Journal of Financial Economics, Elsevier, vol. 40(1), pages 105-134, January. [Downloadable!] (restricted)
  6. Robert E. Verrecchia & Christian Leuz, 1999. "The Economic Consequences of Increased Disclosure," Working Paper Series: Finance and Accounting 41, Department of Finance, Goethe University Frankfurt am Main. [Downloadable!]
  7. Christian Leuz, 2003. "IAS Versus U.S. GAAP: Information Asymmetry-Based Evidence from Germany's New Market," Journal of Accounting Research, Blackwell Publishing, vol. 41(3), pages 445-472, 06. [Downloadable!] (restricted)
  8. Taylor, Martin E. & Jones, Roberta Ann, 1999. "The use of International Accounting Standards terminology, a survey of IAS compliance disclosure," The International Journal of Accounting, Elsevier, vol. 34(4), pages 557-570, 010. [Downloadable!] (restricted)
  9. Warren Bailey & Haitao Li & Connie X. Mao & Rui Zhong, 2003. "Regulation Fair Disclosure and Earnings Information: Market, Analyst, and Corporate Responses," Journal of Finance, American Finance Association, vol. 58(6), pages 2487-2514, December. [Downloadable!] (restricted)
  10. Pascal Dumontier & Bernard Raffournier, 2002. "Accounting and capital markets: a survey of the European evidence," European Accounting Review, Taylor and Francis Journals, vol. 11(1), pages 119-151, May. [Downloadable!] (restricted)
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