The Market Reaction to the Adoption of IFRS in the European Insurance Industry

The Geneva Papers on Risk and Insurance-Issues and Practice, 43, Issue 4, 653-703 (2018)

Posted: 3 Jan 2019

See all articles by Abed Al-Nasser Abdallah

Abed Al-Nasser Abdallah

American University of Sharjah

Wissam Abdallah

Lebanese American University

Feras Salama

American University of Sharjah

Date Written: December 19, 2018

Abstract

This study examines the market reaction of the European insurance industry to the adoption of International Financial Reporting Standards (IFRS) in Europe. Using an event study methodology, we find that investors in the insurance industry reacted favorably to most of the events that led to the adoption of IFRS. However, the positive reaction is not consistent across all events, which may reveal that investors’ concern whether the benefits of IFRS adoption (i.e. comparability and transparency) exceed the costs (i.e. increase audit fees and /or managerial discretion). We also find that investors’ reaction to IFRS adoption differs between life and non-life insurers. Specifically, our multivariate results show that investors in non-life insurance industry react more favorably to IFRS adoption, which indicates that they anticipate the benefits of IFRS to exceed the costs.

Keywords: IFRS, European insurance companies, market reaction, expected return, accounting reforms, life insurance, non-life insurance

JEL Classification: G12, G14, G18, G22

Suggested Citation

Abdallah, Abed Al-Nasser and Abdallah, Wissam and Salama, Feras, The Market Reaction to the Adoption of IFRS in the European Insurance Industry (December 19, 2018). The Geneva Papers on Risk and Insurance-Issues and Practice, 43, Issue 4, 653-703 (2018), Available at SSRN: https://ssrn.com/abstract=3303982

Abed Al-Nasser Abdallah (Contact Author)

American University of Sharjah ( email )

United Arab Emirates
+971 6 515 2594 (Phone)

Wissam Abdallah

Lebanese American University ( email )

P.O. Box 13-5053
Chouran Beirut 11022801
Beirut
Lebanon

HOME PAGE: http://sb.lau.edu.lb/faculty-research/faculty/fa/dr-wissam-abdallah-1.php

Feras Salama

American University of Sharjah ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

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