Mandatory IFRS Reporting and Stock Price Informativeness
AbstractIn this paper, we examine whether mandatory adoption of IFRS influences the flow of firm-specific information and contributes to stock price informativeness as measured by stock return synchronicity. Using a constant sample of 1,904 mandatory IFRS adopters in 14 EU countries for the period 2003-2007, we find a V-shaped pattern in synchronicity around IFRS adoption, which is consistent with IFRS disclosures revealing new firm-specific information in the adoption period (i.e., a reduction of synchronicity) and subsequently lowering the surprise of future disclosures (i.e., an increase in synchronicity). We also find mandatory IFRS adoption increases analystsâ€™ ability to incorporate industry-level information into stock price. However, we are unable to detect a reduction in the private information advantage enjoyed by institutional owners post-IFRS adoption. Moreover, we find the synchronicity effects to be more pronounced for firms in countries with larger differences in local GAAP relative to IFRS. Overall, our evidence yields novel insights on the consequences of mandatory IFRS adoption by investigating its effect on stock price informativeness and the distinctive roles played by a firmâ€™s information environment.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2010-82.
Date of creation: 2010
Date of revision:
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Web page: http://center.uvt.nl
Find related papers by JEL classification:
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
- M48 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-11 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ding, Yuan & Hervé, Stolowy & Hope, Ole-Kristian & Jeanjean, Thomas, 2005.
"Differences between domestic accounting standards and IAS: measurement, determinants and implications,"
Les Cahiers de Recherche
826, HEC Paris.
- Ding, Yuan & Hope, Ole-Kristian & Jeanjean, Thomas & Stolowy, Herve, 2007. "Differences between domestic accounting standards and IAS: Measurement, determinants and implications," Journal of Accounting and Public Policy, Elsevier, vol. 26(1), pages 1-38.
- Ulf Brüggemann & Jörg-Markus Hitz & Thorsten Sellhorn, 2012. "Intended and unintended consequences of mandatory IFRS adoption: A review of extant evidence and suggestions for future research," SFB 649 Discussion Papers SFB649DP2012-011, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Pierre Bonetti & Antonio Parbonetti & Michel Magnan, 2013. "The Influence of Country- and Firm-Level Governance on Financial Reporting Quality: Revisiting the Evidence," CIRANO Working Papers 2013s-03, CIRANO.
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