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Market Reaction to the Adoption of IFRS in Europe
Chris Armstrong University of Pennsylvania - Accounting Department Mary E. Barth Stanford Graduate School of Business Alan D. Jagolinzer Stanford Graduate School of Business Edward J. Riedl Harvard Business School Accounting Review, Forthcoming 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 towards 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 in 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 JEL Classifications: M41, M44, M47, G15, G38 Accepted Paper SeriesDate posted: May 19, 2006 ; Last revised: September 29, 2009Suggested CitationContact Information
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