Stock Market Synchronicity – An Alternative Approach to Assessing the Information Impact of Australian IFRS

26 Pages Posted: 17 Jan 2012

See all articles by Sanjay Bissessur

Sanjay Bissessur

Amsterdam Business School - University of Amsterdam

Allan Hodgson

University of Queensland - Business School

Date Written: March 2012

Abstract

How has the mandatory adoption in 2005 of International Financial Reporting Standards in (IFRS) affected information flow for investors in Australia? This paper investigates impact by examining synchronicity issues. Morck et al. (2000) label the degree to which stock prices depend upon market and industry wide information as market synchronicity, and the degree to which they reflect firm specific information as idiosyncratic dependency. Increased synchronicity can signal several events, including a loss of confidence in firm specific accounting data, reduced transparency, or evidence of a greater degree of cross sectional comparability. We develop and test three theoretical models on the impact of IFRS and find a general decrease in synchronicity in the first two post‐IFRS years, followed by a reversion to a significantly higher level in later years. Further tests reveal lower analyst forecast earnings errors post‐IFRS. Results provide restrictive support for the International Accounting Standards Board contention that IFRS accounting provides higher specific and comparable information content – at least for sophisticated financial analysts.

Keywords: Market synchronicity, IFRS information flow, Comparable accounting information, G12, G14, M41

Suggested Citation

Bissessur, Sanjay and Hodgson, Allan, Stock Market Synchronicity – An Alternative Approach to Assessing the Information Impact of Australian IFRS (March 2012). Accounting & Finance, Vol. 52, Issue 1, pp. 187-212, 2012, Available at SSRN: https://ssrn.com/abstract=1986556 or http://dx.doi.org/10.1111/j.1467-629X.2010.00388.x

Sanjay Bissessur (Contact Author)

Amsterdam Business School - University of Amsterdam ( email )

Plantage Muidergracht 12
Amsterdam, 1018 TV
Netherlands

Allan Hodgson

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

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