Market Reaction to the Adoption of Ifrs in Europe
THE ACCOUNTING REVIEW Vol. 85, No. 1 2010 pp. 31–61
American Accounting Association DOI: 10.2308 / accr.2010.85.1.31
Market Reaction to the Adoption of IFRS in Europe
Christopher S. Armstrong University of Pennsylvania Mary E. Barth Alan D. Jagolinzer Stanford University Edward J. Riedl Harvard University
ABSTRACT: This study examines European stock market reactions to 16 events associated with the adoption of International Financial Reporting Standards (IFRS) in Europe. European IFRS adoption represented a major milestone toward financial reporting convergence yet spurred controversy reaching the highest levels of government. We find an incrementally positive reaction for firms with lower quality pre-adoption information, which is more pronounced for banks, and with higher pre-adoption information asymmetry, consistent with investors expecting net information quality benefits from IFRS adoption. We find an incrementally negative reaction for firms domiciled in code law countries, consistent with investors’ concerns over enforcement of IFRS in those countries. Finally, we find a positive reaction to IFRS adoption events for firms with high-quality pre-adoption information, consistent with investors expecting net convergence benefits from IFRS adoption. Keywords: IFRS; IAS 39; convergence; Europe. Data Availability: All data are publicly available from sources indicated in the text. JEL Classifications: M41, G15, G38.
We thank Robert Bushman, Craig Chapman, Tony Cope, Gilbert Gelard, Ian Gow, Bob Holthausen, Ole-Kristian ´ Hope, Dave Larcker, Jim Leisenring, Dave Maber, Greg Miller, Karl Muller, Joe Piotroski, Thorsten Sellhorn, Dan Taylor, and two anonymous referees for helpful comments and discussions. We also thank seminar participants at the American Accounting Association Annual Meeting, especially Luzi Hail, discussant, European Accounting Association Annual Congress, Harvard Business School Accounting Seminar Series, Harvard Business School International
American Accounting Association DOI: 10.2308 / accr.2010.85.1.31
Market Reaction to the Adoption of IFRS in Europe
Christopher S. Armstrong University of Pennsylvania Mary E. Barth Alan D. Jagolinzer Stanford University Edward J. Riedl Harvard University
ABSTRACT: This study examines European stock market reactions to 16 events associated with the adoption of International Financial Reporting Standards (IFRS) in Europe. European IFRS adoption represented a major milestone toward financial reporting convergence yet spurred controversy reaching the highest levels of government. We find an incrementally positive reaction for firms with lower quality pre-adoption information, which is more pronounced for banks, and with higher pre-adoption information asymmetry, consistent with investors expecting net information quality benefits from IFRS adoption. We find an incrementally negative reaction for firms domiciled in code law countries, consistent with investors’ concerns over enforcement of IFRS in those countries. Finally, we find a positive reaction to IFRS adoption events for firms with high-quality pre-adoption information, consistent with investors expecting net convergence benefits from IFRS adoption. Keywords: IFRS; IAS 39; convergence; Europe. Data Availability: All data are publicly available from sources indicated in the text. JEL Classifications: M41, G15, G38.
We thank Robert Bushman, Craig Chapman, Tony Cope, Gilbert Gelard, Ian Gow, Bob Holthausen, Ole-Kristian ´ Hope, Dave Larcker, Jim Leisenring, Dave Maber, Greg Miller, Karl Muller, Joe Piotroski, Thorsten Sellhorn, Dan Taylor, and two anonymous referees for helpful comments and discussions. We also thank seminar participants at the American Accounting Association Annual Meeting, especially Luzi Hail, discussant, European Accounting Association Annual Congress, Harvard Business School Accounting Seminar Series, Harvard Business School International