Timing Equity Issuance in Response to Information Asymmetry Arising from IFRS Adoption in Australia and Europe

Journal of Accounting Research, Forthcoming

60 Pages Posted: 5 Oct 2010

See all articles by Shiheng Wang

Shiheng Wang

Hong Kong University of Science & Technology (HKUST)

Michael Welker

Queen's University - Smith School of Business

Date Written: October 4, 2010

Abstract

This study examines the association between changes in reported financial performance resulting from mandatory adoption of International Financial Reporting Standards (IFRS) and equity issuance during the transition period leading up to IFRS adoption for listed firms in Australia and Europe. We hypothesize that firms affected by the accounting standards change strategically time equity issuance around the time the firm discloses the effects of IFRS adoption on reported financial performance. We document circumstances where market returns are associated with the reconciliation of net income between local GAAP and IFRS. We find that a firm’s likelihood of equity issuance and equity issue size during the three years prior to the IFRS reconciliation disclosure are negatively associated with the unexpected change in net income resulting from the conversion to IFRS.

Keywords: IFRS, financial statement reconciliations, information asymmetry, market timing, equity issuance

Suggested Citation

Wang, Shiheng and Welker, Michael, Timing Equity Issuance in Response to Information Asymmetry Arising from IFRS Adoption in Australia and Europe (October 4, 2010). Journal of Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1687440

Shiheng Wang (Contact Author)

Hong Kong University of Science & Technology (HKUST) ( email )

Clear Water Bay
Kowloon, 999999
Hong Kong
(852) 2358 7570 (Phone)
(852) 2358 1693 (Fax)

Michael Welker

Queen's University - Smith School of Business ( email )

Kingston
Ontario, Ontario K7L 3N6
Canada

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