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Post by Sapphire Capital on Sept 26, 2008 23:58:24 GMT 4
Market Reaction to the Adoption of IFRS in Europe Chris Armstrong University of Pennsylvania - Accounting Department Mary E. Barth Stanford Graduate School of Business Alan D. Jagolinzer Stanford Graduate School of Business Edward J. Riedl Harvard Business School September 8, 2008 Harvard Business School Finance Working Paper No. 09-032 Abstract: This study examines the European stock market reaction to sixteen events associated with the adoption of International Financial Reporting Standards (IFRS) in Europe. European IFRS adoption represented a major milestone towards financial reporting convergence yet spurred controversy reaching the highest levels of government. We find a more positive reaction for firms with lower quality pre-adoption information, which is more pronounced in banks, and with higher pre-adoption information asymmetry, consistent with investors expecting net information quality benefits from IFRS adoption. We also find that the reaction is less positive for firms domiciled in code law countries, consistent with investors' concerns over enforcement of IFRS in those countries. Finally, we find a positive reaction to IFRS adoption events for firms with high quality pre-adoption information, consistent with investors expecting net convergence benefits from IFRS adoption. Overall, the findings suggest that investors in European firms perceived net benefits associated with IFRS adoption. papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1265032_code698198.pdf?abstractid=1265032&mirid=1
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