52 Pages Posted: 10 Sep 2008 Last revised: 4 Apr 2012
Date Written: April 20, 2009
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 Classification: M41, G15, G38
Suggested Citation: Suggested Citation
Armstrong, Chris and Barth, Mary E. and Jagolinzer, Alan D. and Riedl, Edward J., Market Reaction to the Adoption of IFRS in Europe (April 20, 2009). Accounting Review, Forthcoming; Harvard Business School Finance Working Paper No. 09-032; Rock Center for Corporate Governance at Stanford University Working Paper No. 5. Available at SSRN: https://ssrn.com/abstract=1265032
By Ray Ball