The Impact of Mandatory IFRS Reporting on Institutional Trading Costs: Evidence from Australia

21 Pages Posted: 3 Aug 2018

See all articles by Andrew Lepone

Andrew Lepone

Macquarie University, Macquarie Business School

Jin Boon Wong

University of Sydney - Discipline of Accounting

Date Written: July/August 2018

Abstract

This study examines the impact of mandatory International Financial Reporting Standards (IFRS) on the market quality of the Australian Securities Exchange (ASX) 200 constituent stocks. Using traditional metrics that are consistent with prior literature (i.e., bid‐ask spreads), the first stage analysis confirms that stock liquidity has improved. However, when the analysis is extended to consider the trading costs incurred by market participants (i.e., execution shortfall), results suggest liquidity has not changed significantly. The paper utilizes rich unique datasets that contain detailed trade information, and findings are robust after controlling for trade difficulty and market conditions. In the era of High Frequency Trading (HFT) and occurrences of ‘fleeting’ liquidity, this paper provides some evidence that while IFRS may have enhanced ‘visible’ bid‐ask spreads, tangible liquidity for market participants, particularly global institutional investors, has not improved significantly.

Keywords: accounting standards, Australian Securities Exchange, bid‐ask spreads, execution shortfall, fleeting liquidity, high frequency trading, IFRS, institutional investors, liquidity, market quality

Suggested Citation

Lepone, Andrew and Wong, Jin Boon, The Impact of Mandatory IFRS Reporting on Institutional Trading Costs: Evidence from Australia (July/August 2018). Journal of Business Finance & Accounting, Vol. 45, Issue 7-8, pp. 797-817, 2018, Available at SSRN: https://ssrn.com/abstract=3225476 or http://dx.doi.org/10.1111/jbfa.12320

Andrew Lepone (Contact Author)

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Jin Boon Wong

University of Sydney - Discipline of Accounting

H69 Economics and Business Building
Sydney, NSW 2006
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1
Abstract Views
733
PlumX Metrics