Mandatory IFRS Reporting and Stock Price Informativeness

Abstract

Mandatory IFRS Reporting and Stock Price InformativenessBeuselinck, C.A.C.; Joos, P.P.M.; Khurana, I.K.; van der Meulen, S. Publication date: 2010 Link to publication Citation for published version (APA):Beuselinck, C. A. C., Joos, P. P. M., Khurana, I. K., & van der Meulen, S. (2010). Mandatory IFRS Reporting and Stock Price Informativeness. (CentER Discussion Paper; Vol. 2010-82). Tilburg: Accounting. General rightsCopyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright owners and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights.-Users may download and print one copy of any publication from the public portal for the purpose of private study or research -You may not further distribute the material or use it for any profit-making activity or commercial gain -You may freely distribute the URL identifying the publication in the public portal Take down policyIf you believe that this document breaches copyright, please contact us providing details, and we will remove access to the work immediately and investigate your claim. Mandatory IFRS Reporting and Stock Price InformativenessAbstract: In 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 analysts' 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 firm's information environment.

The Impact of IFRS Adoption on Earnings Quality: A Study Conducted on Foreign Issuers in the United States

“…According to prior research the difference-in-differences approach is applied when testing differences between two time periods, as well as, at the same time the differences between two subjects, i.e. in this research pre-IFRS period and post-IFRS period, and foreign issuers that adopt IFRS and otherwise (Beuselinck et al, 2010;Li, 2010;Sun et al, 2011;Kang et al, 2012). Since accruals quality is considered as an earnings attribute for earnings quality, it can be used to examine the change in earnings quality for foreign issuers after the change in accounting standards.…”

Mandatory IFRS Reporting and Changes in Enforcement

“…Among other things, studies show positive abnormal stock returns during important events leading up to IFRS adoption (Armstrong et al, 2010); an increase in market liquidity and decrease in cost of capital (Daske et al, 2008(Daske et al, , 2013Li, 2010; 10! Florou and Kosi, 2013); more foreign investments in debt and equity instruments of firms domiciled in IFRS adopting countries (Beneish et al, 2010;DeFond et al, 2011;Brüggemann et al, 2012) together with a reduction in home bias among U.S. investors (Khurana and Michas, 2011;Shima and Gordon, 2011); higher information content of IFRS earnings ; an increase in stock price informativeness (Beuselinck et al, 2009); and improvements in financial analysts' information environment (Byard et al, 2011;Tan et al, 2011;Horton et al, 2013). 8 Based on these findings, one could conclude that mandatory IFRS adoption has improved the transparency and comparability of financial statements as well as reduced information asymmetries.…”

Earnings and Balance Sheet Conservatism in Malaysia: The Effect of Malaysia's Convergence to International Financial Reporting Standards (IFRS)

“…There are evidence that IFRS can reduce analysts' absolute forecast error (Ashbaugh & Pincus, 2001), have more persistent and more conditionally conservative earnings (Gassen et al, 2006), can cause an increase in market liquidity (Daske, Hail, Leuz, & Verdi, 2008), and a decrease in earnings management (Barth, Landsman, & Lang, 2008;Zéghal, Chtourou, & Sellami, 2011) and an increase in stock price informativeness (Beuselinck, Joos, Khurana, & Meulen, 2009). There are also evidences that IFRS can enhance conservatism.…”