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Proper Inferences Or A Market For Excuses The Capital Market Effects Of Mandatory Ifrs Adoption
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Book Synopsis Proper Inferences Or a Market for Excuses? The Capital-Market Effects of Mandatory IFRS Adoption by : Hans Bonde Christensen
Download or read book Proper Inferences Or a Market for Excuses? The Capital-Market Effects of Mandatory IFRS Adoption written by Hans Bonde Christensen and published by . This book was released on 2013 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Barth and Israeli (2013) raise five serious concerns regarding the research design and interpretation of Christensen, Hail, and Leuz (2013). They claim: (i) the evidence stands in stark contrast to Daske, Hail, Leuz, and Verdi (2008) and fails to replicate its prior findings; (ii) the research design using fixed effects leaves out main effects and two-way interactions which likely biases the estimated liquidity effects around IFRS adoption and changes in enforcement; (iii) the vast majority of sample observations do not contribute to the identification which is misleading in terms of the scope and the conclusions that can be drawn from the study; (iv) the timing of IFRS adoption and enforcement changes is measured imprecisely leading to low power tests; and (v) the evidence from Japan is irrelevant to the study. In this note, we show that all five claims are incorrect or misleading. Our discussion also more broadly describes how to properly interpret the fixed-effect specifications in Christensen, Hail, and Leuz (2013). Since studies in accounting, finance, and economics make extensive use of fixed-effect models, a correct understanding of this research design is important to avoid interpretational mistakes. More generally, we discuss that proper empirical identification and inferences are important to international accounting and IFRS studies so that this area of research does not become a market for excuses.
Book Synopsis Essays on the Economic Consequences of Mandatory IFRS Reporting around the world by : Ulf Brüggemann
Download or read book Essays on the Economic Consequences of Mandatory IFRS Reporting around the world written by Ulf Brüggemann and published by Springer Science & Business Media. This book was released on 2011-08-31 with total page 162 pages. Available in PDF, EPUB and Kindle. Book excerpt: Ulf Brüggemann discusses and empirically investigates the economic consequences of mandatory switch to IFRS. He provides evidence that cross-border investments by individual investors increased following the introduction of IFRS.
Book Synopsis Three Essays on the Effects of the Simultaneous Adoption of IFRS (International Financial Reporting Standards) and MAD (Market Abuse Directive) in Europe by : Fatima Baalbaki Shibly
Download or read book Three Essays on the Effects of the Simultaneous Adoption of IFRS (International Financial Reporting Standards) and MAD (Market Abuse Directive) in Europe written by Fatima Baalbaki Shibly and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: While prior research on mandatory IFRS adoption fails to provide evidence of improvement in the quality of financial reporting (increased transparency and/or comparability), it provides almost unanimous evidence of beneficial capital-market impacts. Within the European Union (EU), mandatory IFRS adoption coincides with the adoption of the Market Abuse Directive (MAD). While the mandatory adoption of IFRS took place in 2005, MAD was passed between 2004 and 2007 depending on the EU country under consideration. Furthermore, both IFRS and MAD aim towards increased transparency, either by improving the quality of financial reporting (IFRS) or by prohibiting selective disclosures to enhance common information available to all market participants (MAD). Our first essay aims to disentangle the respective market impacts of MAD adoption and IFRS adoption in order to determine the specific effect of each regulation. Our evidence suggests that a significant part of the capital market effects usually attributed to IFRS comes, at least to some extent, from the contemporaneous adoption of the Market Abuse Directive. Our second essay focuses on the role of information environment. Investigating how information environment affects the market impacts of both MAD adoption and IFRS adoption is crucial to determine whether all firms benefit identically from these regulations. Using firm size and analyst following as proxies capturing firms' information environment, we provide evidence showing that small firms and firms with weak analyst following are those that benefit the most from the introduction of the IFRS mandate. In contrast, large firms and firms with high analyst coverage benefit the most from MAD adoption. Our third essay analyzes the role of enforcement. We find that the effectiveness of both IFRS and MAD is hampered by different enforcement levels across firms and countries. Moreover, the observed capital-market outcomes on one regulation differ if the effects of both regulations are not clearly dissociated. Thus, we caution researchers not to attribute capital-market outcomes primarily or solely to one regulation without taking into account the concomitant adoption of the other one.
Book Synopsis The Impact of Mandatory IFRS Adoption on IPOs in Global Capital Markets by : Hyun A. Hong
Download or read book The Impact of Mandatory IFRS Adoption on IPOs in Global Capital Markets written by Hyun A. Hong and published by . This book was released on 2017 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the impact of mandatory IFRS adoption on IPO underpricing and the relative amount of IPO capital raised in foreign markets. Using a difference-in-differences design, we find a decrease in IPO underpricing and an increase in the relative proceeds from foreign markets following mandatory IFRS adoption. We also find that mandatory IFRS adoption has a greater impact on IPO underpricing and relative foreign proceeds for firms in countries with a larger number of accounting changes, and this relation is more pronounced among firms in countries with stronger implementation credibility. In addition, we find that the decrease in underpricing associated with mandatory IFRS adoption holds for both domestic IPOs and global IPOs, and this effect is more pronounced for global IPOs than for domestic IPOs. Overall, our study contributes to the literature by documenting the impact of changes in financial accounting standards on IPO underpricing and capital market globalization.
Book Synopsis The Introduction of IFRS. Consequences for Investment Decisions by : Simon Falcke
Download or read book The Introduction of IFRS. Consequences for Investment Decisions written by Simon Falcke and published by . This book was released on 2020-06-17 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Mandatory IFRS Reporting Around the World by : Holger Daske
Download or read book Mandatory IFRS Reporting Around the World written by Holger Daske and published by . This book was released on 2011 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the economic consequences of mandatory IFRS reporting around the world. We analyze the effects on market liquidity, cost of capital and Tobin's q in 26 countries using a large sample of firms that are mandated to adopt IFRS. We find that, on average, market liquidity increases around the time of the introduction of IFRS. We also document a decrease in firms' cost of capital and an increase in equity valuations, but only if we account for the possibility that the effects occur prior to the official adoption date. Partitioning our sample, we find that the capital-market benefits occur only in countries where firms have incentives to be transparent and where legal enforcement is strong, underscoring the central importance of firms' reporting incentives and countries' enforcement regimes for the quality of financial reporting. Comparing mandatory and voluntary adopters, we find that the capital market effects are most pronounced for firms that voluntarily switch to IFRS, both in the year when they switch and again later, when IFRS become mandatory. While the former result is likely due to self-selection, the latter result cautions us to attribute the capital-market effects for mandatory adopters solely or even primarily to the IFRS mandate. Many adopting countries have made concurrent efforts to improve enforcement and governance regimes, which likely play into our findings. Consistent with this interpretation, the estimated liquidity improvements are smaller in magnitude when we analyze them on a monthly basis, which is more likely to isolate IFRS reporting effects.
Book Synopsis Capital Market Reactions to IFRS in the United States by : Jennifer Yardley
Download or read book Capital Market Reactions to IFRS in the United States written by Jennifer Yardley and published by . This book was released on 2016 with total page 112 pages. Available in PDF, EPUB and Kindle. Book excerpt: The rise of International Financial Reporting Standards (IFRS) as a contender to be the single globally-accepted set of accounting standards has been accompanied by a wealth of research studying the consequences of IFRS adoption. However, prior research does little to address the potential effects of and market sentiment toward the use of IFRS rather than U.S. GAAP in the United States. This study fills this gap by examining the accounting standard choices of foreign private issuers in the United States. In addition to identifying the factors that are associated with a firm's accounting standard choice in the U.S., this study addresses the capital market reaction to this choice by comparing the value relevance of U.S. GAAP and IFRS financial statements and the trading volume reaction surrounding earnings announcements. Several firm characteristics prove to be significantly related to firms' accounting standard choices in the United States, supporting the idea that firms choosing IFRS or U.S. GAAP are making this decision based on relative costs and benefits. Larger firms that are listed on more exchanges are more likely to use IFRS. Firms are also more likely to use IFRS in the United States when they are required to use IFRS in their country of incorporation. Several other factors are related to accounting standard choice to a lesser extent. Results suggest that the different accounting standards used by these firms is associated with the market reaction to their accounting information. While book value and operating cash flows appear to be more value relevant under U.S. GAAP, earnings are more value relevant under IFRS. Additionally, IFRS financial statements appear to be more value relevant as a whole for foreign private issuers. However, additional tests suggest that these differences in value relevance may be driven by firm characteristics other than accounting standard choice. A firm's accounting standards are also related to the market reaction surrounding the earnings announcement, with firms using IFRS experiencing less abnormal trading volume. Once again, the possibility that these differences in trading volume could be related to other firm characteristics cannot be ruled out. Taken together, the results suggest that IFRS may be just as useful as U.S. GAAP to investors in the United States, if not more so, for foreign private issuers.
Book Synopsis Mandatory IFRS Adoption and Financial Statement Comparability by : Francois Brochet
Download or read book Mandatory IFRS Adoption and Financial Statement Comparability written by Francois Brochet and published by . This book was released on 2011 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether mandatory adoption of International Financial Reporting Standards (IFRS) leads to capital market benefits through enhanced financial statement comparability. UK domestic standards are considered very similar to IFRS (Bae et al. 2008), suggesting any capital market benefits observed for UK-domiciled firms are more likely attributable to improvements in comparability (i.e., better precision of across-firm information) than to changes in information quality specific to the firm (i.e., core information quality). If IFRS adoption improves financial statement comparability, we predict this should reduce insiders' ability to benefit from private information. Consistent with these expectations, we find that abnormal returns to insider purchases--used to proxy for private information--are reduced following IFRS adoption. Similar results are derived across numerous subsamples and proxies used to isolate IFRS effects attributable to comparability. Together, the findings are consistent with mandatory IFRS adoption improving comparability and thus leading to capital market benefits by reducing insiders' ability to exploit private information.
Book Synopsis Disentangling Mandatory IFRS Reporting and Changes in Enforcement by : Mary E. Barth
Download or read book Disentangling Mandatory IFRS Reporting and Changes in Enforcement written by Mary E. Barth and published by . This book was released on 2016 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: We discuss “Mandatory IFRS Reporting and Changes in Enforcement” by Christensen, Hail, and Leuz (CHL, 2013). We begin by discussing CHL in the context of prior literature, and subsequently discuss the research design, results, and inferences. CHL seeks to contribute to the literature by disentangling the liquidity benefits of changes in accounting standards from those of changes in enforcement. Taken at face value, we believe that the evidence in CHL suggests that both change in enforcement and adoption of International Financial Reporting Standards (IFRS) confer liquidity benefits. The largest benefits obtain when the change to IFRS reporting is combined with change in enforcement. This is not to say that enforcement conveys capital market benefits but IFRS reporting does not, or that IFRS reporting conveys capital market benefits but enforcement does not; both are necessary to confer capital market benefits.
Book Synopsis Signalling Under Uncertainty by : Osman Ghani
Download or read book Signalling Under Uncertainty written by Osman Ghani and published by . This book was released on 2019 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the liquidity, Tobin's Q, and cost of equity effects from voluntary and mandatory IFRS adoption. In contrast to prior work, we focus on the firm level heterogeneity in the economic consequences, recognising that the level of uncertainty avoidance (UAI) in a country will influence the economic consequences derived from implementing the new standards. Country level uncertainty avoidance is predicted to lead to lower liquidity and Tobin's Q, and a higher cost of equity for mandatory adopters in higher UAI countries, while higher UAI is expected to benefit voluntary adopters in terms of higher liquidity and Tobin's Q, and a lower cost of equity. To test these predictions, we partition the firms into non-adopters, voluntary adopters, and mandatory adopters and also classify firms according to the change in their financial reporting quality. We analyse whether capital markets effects are different across the various groups based on the level of uncertainty avoidance in the host country. We find that prior to the mandatory adoption of IFRS by the EU member states, voluntary adopters in higher UAI countries benefited from increased liquidity and Tobin's Q, compared to identical firms in lower UAI countries, mandatory adopters and non-adopters. However, we find that this result is not persistent post the EU mandate, and that UAI influences both mandatory and voluntary adopters in a similar manner post 2005. The results from the cost of equity analysis suggest that market participants treat mandatory and voluntary adopters in an almost identical manner and that a higher UAI leads to both groups of firms exhibiting a reduction in their cost of equity. Our findings imply that uncertainty avoidance is able to explain part of the heterogeneity exhibited in the capital market outcomes between firms and across countries that have adopted IFRS.
Book Synopsis Mandatory IFRS Reporting and Changes in Enforcement by : Hans Bonde Christensen
Download or read book Mandatory IFRS Reporting and Changes in Enforcement written by Hans Bonde Christensen and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, reporting under International Financial Reporting Standards (IFRS) became mandatory in many countries. The capital-market effects around this change have been extensively studied, but their sources are not yet well understood. This study aims to distinguish between several potential explanations for the observed capital-market effects. We find that, across all countries, mandatory IFRS reporting had little impact on liquidity. The liquidity effects around IFRS introduction are concentrated in the European Union (EU) and limited to five EU countries that concurrently made substantive changes in reporting enforcement. There is little evidence of liquidity benefits in IFRS countries without substantive enforcement changes even when they have strong legal and regulatory systems. Moreover, we find similar liquidity effects for firms that experience enforcement changes but do not concurrently switch to IFRS. Thus, changes in reporting enforcement or (unobserved) factors associated with these changes play a critical role for the observed liquidity benefits after mandatory IFRS adoption. In contrast, the change in accounting standards seems to have had little effect on market liquidity.
Book Synopsis The Effects of Mandatory IFRS Adoption in the EU by : Brian Singleton-Green
Download or read book The Effects of Mandatory IFRS Adoption in the EU written by Brian Singleton-Green and published by . This book was released on 2015 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews the empirical research evidence on the effects of mandatory IFRS adoption in the EU. The research is classified and assessed in relation to the objectives of EU Regulation 1606/2002, which made IFRS mandatory in the EU. The review finds that there is evidence of benefits following IFRS adoption in relation to financial reporting transparency and comparability, the cost of capital, market liquidity, corporate investment efficiency and cross-border capital flows. But the evidence on some of these matters is disputed and it is unclear how far the benefits identified are attributable to the adoption of IFRS or to other concurrent institutional changes, particularly in enforcement. What is clear is that the benefits found are uneven, varying with the institutions and incentives that apply for different companies in different countries. On the possible role of IFRS in the financial crisis in the EU, more research is needed before conclusions can be drawn. The paper also considers the problems of interpreting the research and drawing conclusions from it for policy making purposes.
Book Synopsis The Effect of Mandatory IFRS Adoption on International Cross-Listings by : Long Chen
Download or read book The Effect of Mandatory IFRS Adoption on International Cross-Listings written by Long Chen and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a comprehensive dataset of international cross-listings spanning 34 (50) home (target) countries, we examine whether mandatory IFRS adoption facilitates firms' cross-listing activities. Our results using difference-in-differences analyses show that firms that mandatorily adopt IFRS exhibit significantly higher cross-listing propensity and intensity following IFRS adoption. We also find that firms from mandatory IFRS adoption countries are more likely to cross-list their securities in countries also mandating IFRS and countries with larger and more liquid capital markets. We further find that IFRS adoption has a greater effect on mandatory IFRS adopters from countries with larger accounting differences from IFRS, lower disclosure requirements and less access to external capital prior to IFRS adoption. Our findings are consistent with the notion that mandatory IFRS adoption facilitates firms' cross-listing activities and highlight the importance of considering the change in cross-listings when examining the capital market consequences of mandatory IFRS adoption.
Book Synopsis Meta-analysis of the Impact of Adoption of Ifrs on Financial Reporting Comparability, Market Liquidity and Cost of Capital by : Solomon Opare
Download or read book Meta-analysis of the Impact of Adoption of Ifrs on Financial Reporting Comparability, Market Liquidity and Cost of Capital written by Solomon Opare and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Mandatory Financial Reporting and Voluntary Disclosure by : Li, Xi
Download or read book Mandatory Financial Reporting and Voluntary Disclosure written by Li, Xi and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the effect of the mandatory adoption of International Financial Reporting Standards (IFRS) on voluntary disclosure. Using a difference-in-differences analysis, we document a significant increase in the likelihood and frequency of management earnings forecasts following mandatory IFRS adoption, consistent with the notion that IFRS adoption alters firms' disclosure incentives in response to increased capital-market demand. We find the increase to be larger among firms domiciled in code-law countries, suggesting a catching-up effect among firms facing low disclosure incentives pre-adoption. We then propose and test three channels through which IFRS adoption could alter firms' disclosure incentives: improved earnings quality, increased shareholder demand, and increased analyst demand. We find evidence consistent with all three channels.The appendix to "Mandatory Financial Reporting and Voluntary Disclosure: The Effect of Mandatory IFRS Adoption on Management Forecasts" may be found here: 'http://ssrn.com/abstract=2767001' http://ssrn.com/abstract=2767001.
Book Synopsis Effects on Comparability and Capital Market Benefits of Voluntary Adoption of IFRS by US Firms by :
Download or read book Effects on Comparability and Capital Market Benefits of Voluntary Adoption of IFRS by US Firms written by and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Global Accounting Convergence and the Potential Adoption of IFRS by the United States by : Luzi Hail
Download or read book Global Accounting Convergence and the Potential Adoption of IFRS by the United States written by Luzi Hail and published by . This book was released on 2011 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: Drawing on the academic literature in accounting, finance and economics, we analyze economic and policy factors related to the potential adoption of International Financial Reporting Standards (IFRS) in the U.S. We highlight the unique institutional features of U.S. markets to assess the potential impact of IFRS adoption on the quality and comparability of U.S. reporting practices, the ensuing capital market effects, and the potential costs of switching from U.S. GAAP to IFRS. We discuss the compatibility of IFRS with the current U.S. regulatory and legal environment as well as the possible effects of IFRS adoption on the U.S. economy as a whole. We also consider how a switch to IFRS may affect worldwide competition among accounting standards and standard setters, and discuss the political ramifications of such a decision on the standard setting process and on the governance structure of the International Accounting Standards Board. Our analysis shows that the decision to adopt IFRS mainly involves a cost-benefit tradeoff between (1) recurring, albeit modest, comparability benefits for investors, (2) recurring future cost savings that will largely accrue to multinational companies, and (3) one-time transition costs borne by all firms and the U.S. economy as a whole, including those from adjustments to U.S. institutions. We conclude by outlining several possible scenarios for the future of U.S. accounting standards, ranging from maintaining U.S. GAAP, letting firms decide whether and when to adopt IFRS, to the creation of a competing U.S. GAAP-based set of global accounting standards that could serve as an alternative to IFRS.
