Mandatory IFRS Reporting and Stock Price Informativeness

54 Pages Posted: 16 Apr 2009

See all articles by Christof Beuselinck

Christof Beuselinck

Catholic University of Lille - IESEG School of Management

Philip Joos

Tilburg University

Inder K. Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business

Sofie Van der Meulen

Catholic University of Lille - IÉSEG School of Management, Lille Campus

Date Written: April 14, 2009

Abstract

In this paper, we examine whether mandatory adoption of IFRS reduces firm opacity and contributes to stock price informativeness. Using data from EU countries, we document a V-shaped pattern in stock return 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 that mandatory IFRS adoption (1) increases analyst ability to incorporate industry-level information into stock prices and (2) reduces the private information advantage enjoyed by institutional owners. Further, our results are especially driven by firms domiciled in strong enforcement countries, highlighting the importance of enforcement quality for the transparency effects of IFRS. Overall, our study highlights the role of several key elements of the information environment and how these elements interact with accounting standards.

Keywords: Mandatory IFRS adoption, stock price informativeness, synchronicity

JEL Classification: M41, M45, G12, N20

Suggested Citation

Beuselinck, Christof and Joos, Philip and Khurana, Inder and Van der Meulen, Sofie, Mandatory IFRS Reporting and Stock Price Informativeness (April 14, 2009). Available at SSRN: https://ssrn.com/abstract=1381242 or http://dx.doi.org/10.2139/ssrn.1381242

Christof Beuselinck (Contact Author)

Catholic University of Lille - IESEG School of Management ( email )

3 Rue de la Digue
Office: A321
Puteaux, 92800
France
+33320545892 (Phone)

Philip Joos

Tilburg University ( email )

School of Economics and Management
Warandelaan 2
Tilburg, 5000 LE
Netherlands
31 13 4668716 (Phone)
31 13 4668001 (Fax)

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/philjoos/

Inder Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business ( email )

331 Cornell Hall
Columbia, MO 65211
United States
573-882-3474 (Phone)
573-882-2437 (Fax)

Sofie Van der Meulen

Catholic University of Lille - IÉSEG School of Management, Lille Campus ( email )

3 rue de la Digue
Lille, 59000
France

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