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International Financial Reporting Standards and Market Efficiency: A European Perspective

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

We investigate how the voluntary adoption of the International Financial Reporting Standards (IFRS) prior to 2005 has contributed to the informational efficiency regarding pan-European stock markets. We find evidence of the potential usefulness of the IFRS for making financial decisions. Taking a sample of IFRS early adopters, our study indicates that the new standards clearly support the semistrong-form of market efficiency for the firms disclosing good accounting news, while a more progressive diffusion of information and a penalty effect occur for the bad news firms. There is also evidence of an improvement in information asymmetries, thanks to the adoption of the IFRS, providing support for their contribution to the strong-form of market efficiency.

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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 06-04.

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Date of creation: 2006
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Handle: RePEc:crf:wpaper:06-04

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Related research
Keywords: IFRS; Efficient market hypothesis (EMH); Event study; Bid-ask spread.;

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

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