IFRS Reporting, Firm-Specific Information Flows, and Institutional Environments: International Evidence

52 Pages Posted: 5 Dec 2012

See all articles by Jeong-Bon Kim

Jeong-Bon Kim

Simon Fraser University; City University of Hong Kong

Haina Shi

Fudan University - School of Management

Date Written: December 4, 2012

Abstract

This study investigates whether and how a firm’s voluntary adoption of International Financial Reporting Standards (IFRS) influences the extent to which firm-specific information is capitalized into stock prices measured by stock price synchronicity. We also study the role of analyst following and institutional environments in determining the relation between IFRS reporting and synchronicity. Using firm-level data from 34 countries, we find that synchronicity is significantly lower for IFRS adopters than for non-adopters across all regression specifications and that for IFRS adopters it decreases from the pre-adoption period to the post-adoption period. This finding supports the view that voluntary IFRS adoption facilitates the incorporation of firm-specific information into stock prices, thereby reducing synchronicity. We also find that the synchronicity-reducing effect of IFRS adoption is attenuated (accentuated) for firms with high (low) analyst following and is stronger (weaker) for firms in countries with poor (good) institutional environments.

Keywords: International Financial Reporting Standards (IFRS), Firm-specific information flows, Analyst coverage, Institutional environment

JEL Classification: M16, G14, M48

Suggested Citation

Kim, Jeong-Bon and Shi, Haina, IFRS Reporting, Firm-Specific Information Flows, and Institutional Environments: International Evidence (December 4, 2012). Review of Accounting Studies, Vol. 17, No. 3, 2012, Available at SSRN: https://ssrn.com/abstract=2184709

Jeong-Bon Kim

Simon Fraser University ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

City University of Hong Kong ( email )

Department of Accountancy
83 Tat Chee Avenue
Kowloon Tong
Hong Kong
852-3442-7909 (Phone)

Haina Shi (Contact Author)

Fudan University - School of Management ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China

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