Capital market effects of mandatory IFRS 8 adoption: An empirical analysis of German firms

Nina Franzen and Barbara E. Weißenberger

Journal of International Accounting, Auditing and Taxation, 2018, vol. 31, issue C, 1-19

Abstract: In this paper, we analyze capital market effects associated with the mandatory adoption of IFRS 8 for a sample of German firms. Our research is motivated by the change in segment reporting rules due to the adoption of the management approach resulting from the IASB and FASB short-term convergence project. In particular, we use a difference-in-differences design to investigate whether firms applying IFRS 8 experience a decrease in information asymmetry and/or an increase in forecast accuracy. We document no significant decline in information asymmetry, measured by bid-ask spreads and depths, and no significant increase in forecast accuracy, measured by forecast errors, between the pre and post IFRS 8 periods for mandatory adopters relative to a group of control firms. Thus, we find no unique effects of the mandatory adoption of IFRS 8 for German firms. Our results indicate that adopting supposed US ‘best practice’ might not necessarily be the best choice for every IFRS-applying country. Our findings should be of interest to the IASB, which finished its post-implementation review of IFRS 8 in 2013 and is currently considering potential changes to IFRS 8.

Keywords: Segment reporting; IFRS 8; IAS 14R; Information asymmetry; Forecast accuracy; Difference-in-differences design (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jiaata:v:31:y:2018:i:c:p:1-19

DOI: 10.1016/j.intaccaudtax.2017.11.002

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