The Market Reaction to SEC IFRS-Related Announcements PDF Download
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Author: Jenice J. Prather-Kinsey
Publisher:
ISBN:
Category :
Languages : en
Pages : 47
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Book Description
The objective of our study is to test whether the adoption of International Financial Reporting Standards (IFRS) in the United States (U.S.) is perceived positively by American Depository Receipt (ADR) firms' equity market participants. We conduct our tests by studying market reactions to the Securities and Exchange Commission's (SEC) IFRS-related press releases between 2007 and 2011 regarding potential adoption of IFRS in the U.S. Using a sample of ADR firms and multivariate regression analyses, we test the 3-day cumulative abnormal returns (CAR) of investors of ADR firms in response to SEC announcements on potential IFRS adoption. We find a significant and positive market reaction to the SEC's announcements related to the potential adoption of IFRS in the U.S. for ADR firms reporting their financial statements using IFRS, especially in the industry where IFRS is the globally predominant accounting standard. Conversely, we find a significantly negative market reaction to SEC related announcements of potential adoption of IFRS in the U.S. for ADR firms currently reporting their financial statements using U.S. generally accepted accounting principles (GAAP). We conclude that the SEC's adoption of IFRS may benefit global and U.S. equity market participants relative to Local GAAP reporting (reporting using domestic GAAP that is not IFRS or U.S. GAAP) by providing a common basis for investors, issuers and others to evaluate investment opportunities.
Author: Jenice J. Prather-Kinsey
Publisher:
ISBN:
Category :
Languages : en
Pages : 47
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Book Description
The objective of our study is to test whether the adoption of International Financial Reporting Standards (IFRS) in the United States (U.S.) is perceived positively by American Depository Receipt (ADR) firms' equity market participants. We conduct our tests by studying market reactions to the Securities and Exchange Commission's (SEC) IFRS-related press releases between 2007 and 2011 regarding potential adoption of IFRS in the U.S. Using a sample of ADR firms and multivariate regression analyses, we test the 3-day cumulative abnormal returns (CAR) of investors of ADR firms in response to SEC announcements on potential IFRS adoption. We find a significant and positive market reaction to the SEC's announcements related to the potential adoption of IFRS in the U.S. for ADR firms reporting their financial statements using IFRS, especially in the industry where IFRS is the globally predominant accounting standard. Conversely, we find a significantly negative market reaction to SEC related announcements of potential adoption of IFRS in the U.S. for ADR firms currently reporting their financial statements using U.S. generally accepted accounting principles (GAAP). We conclude that the SEC's adoption of IFRS may benefit global and U.S. equity market participants relative to Local GAAP reporting (reporting using domestic GAAP that is not IFRS or U.S. GAAP) by providing a common basis for investors, issuers and others to evaluate investment opportunities.
Author: Jennifer Yardley
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 112
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Book Description
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.
Author: Enrico Onali
Publisher:
ISBN:
Category :
Languages : en
Pages : 15
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Book Description
We are the first to examine the market reaction to 13 announcement dates related to IFRS 9 for over 5,400 European listed firms. We find an overall positive reaction to the introduction of IFRS 9. The regulation is particularly beneficial to shareholders of firms in countries with weaker rule of law and a smaller divergence between local GAAP and IAS 39. Bootstrap simulations rule out the possibility that sampling error or data mining are driving our findings. Our main findings are also robust to confounding events and the extent of the media coverage for each event. These results suggest that investors perceive the new regulation as shareholder-wealth enhancing and support the view that stronger comparability across accounting standards of European firms is beneficial to international investors and outweighs the costs of poorer firm-specific information.
Author: Earl Kay Stice
Publisher:
ISBN:
Category : Corporation reports
Languages : en
Pages : 286
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Book Description
Author: Ruihai Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 38
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Book Description
The SEC's EDGAR log files provide a direct, powerful measure of attention from relatively sophisticated investors. We apply this measure to a sample of earnings announcements from 2003 to 2016. We find that the stock market is less surprised, and the post-earnings-announcement drift is weaker for earnings announcements receiving more pre-announcement investor attention, measured in downloads by humans from EDGAR. We further show that it is profitable to utilize the different drift patterns. An attention-based portfolio without the SEC reporting lag that longs stocks with the lowest investor attention and most positive earnings surprises and shorts stocks with the lowest attention and most negative earnings surprises generates a statistically significant monthly alpha of 1.24% after adjusting for standard asset pricing factors.
Author: Chris Armstrong
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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Book Description
This study examines European stock market reactions to 16 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 an incrementally 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 find an incrementally negative reaction 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.
Author: Christopher S. Armstrong
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
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.
Author: International Accounting Standards Board
Publisher:
ISBN: 9781904230021
Category : Accounting
Languages : en
Pages : 10
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Book Description
Author: Lucy Huajing Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
The U.S. SEC approved in December 2007 to accept financial statements prepared under IFRS as issued by the IASB without reconciliation to U.S. GAAP for foreign firms. Using a sample of foreign firms that use IFRS and reconcile to U.S. GAAP from 2005 to 2006, we find that earnings reconciliation from IFRS to U.S. GAAP is positively and significantly associated with abnormal trading volume in the U.S. markets around the Form 20-F filing dates. We also document that the trading volume reaction in the U.S. markets is weaker for firms that use IFRS as issued by the IASB than for firms that use other versions of IFRS. Moreover, the trading volume reaction in the U.S. markets exists for firms with low institutional holdings and for first-time IFRS filers but disappears for firms with high institutional holdings and for continuous IFRS filers. Furthermore, we do not find any evidence that earnings reconciliation is significantly associated with abnormal trading volume in the local markets for the full sample and for any partitioned sample. Our evidence is of interest to the SEC when evaluating the effectiveness of its no-reconciliation rule and considering allowing U.S. domestic firms to prepare financial statements under IFRS.
Author: Enrico Onali
Publisher:
ISBN:
Category :
Languages : en
Pages : 18
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Book Description
We examine the market reaction to events related to the standard-setting process of International Financial Reporting Standard (IFRS) 9 for over 3,000 European firms that have adopted IFRS. We find that the market reaction to IFRS 9 is largely affected by firm-specific factors associated with information quality and information asymmetry. In particular, lower information asymmetry and higher information quality have a positive effect on market-adjusted returns. This is in conflict with the common view that IFRS 9 will improve accounting quality for those firms that need it most (namely, small firms with low liquidity and concentrated ownership structure).
