Security Returns and Volume Responses Around International Financial Reporting Standards (IFRS) Earnings Announcements

Kingsley O. Olibe

The International Journal of Accounting, 2016, vol. 51, issue 2, 240-265

Abstract: To improve comparability of financial statements across countries, the US Securities and Exchange Commission (SEC) and the International Accounting Standards Board (IASB) are involved in the convergence process for a single set of high-quality accounting standards. This paper examines and interprets the security market response around IFRS-based earnings announcements of UK cross-listed firms in the US equity markets. How US market participants react to IFRS earnings disclosures on a daily basis is important regulators (e.g., the SEC and the FASB) in their task in improving comparability of financial reporting. As predicted, I find evidence of significant price and trading responses on day t=0 and +1, which suggests that IFRS earnings news helps facilitate the price and trading adjustment process. The immediate price reaction over the 3-day announcement window on average is 41.8% for IFRS earnings news, whereas it is 79% for US GAAP earnings disclosures. These findings suggest that investors price 42% of the surprise in IFRS-using firms' earnings announcements, suggesting that US GAAP earnings information is systematic (i.e., has market-wide effect) and/or that IFRS-based earnings contain less unexpected informative news relative to US earnings disclosures. The evidence shows that IFRS is sufficient to support the production of information that investors are apparently willing to use.

Keywords: International Financial Reporting Standards (IFRS) versus US GAAP; Trading and price responses; Information content; The sample firms together with their earnings announcement dates are available from the author. The remaining data can be obtained from the sources identified in the paper. (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0020706316300218
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:accoun:v:51:y:2016:i:2:p:240-265

DOI: 10.1016/j.intacc.2016.04.002

Access Statistics for this article

The International Journal of Accounting is currently edited by A. R. Abdel-Khalik

More articles in The International Journal of Accounting from Elsevier
Bibliographic data for series maintained by Catherine Liu ().