The effect of voluntary international financial reporting standards adoption on information asymmetry in the stock market: Evidence from Japan

Jong-Hoon Kim, Keishi Fujiyama and Yuya Koga

Research in International Business and Finance, 2024, vol. 69, issue C

Abstract: This study investigates how voluntary International Financial Reporting Standards (IFRS) adoption impacts information asymmetry in the stock market. We analyze data from firms in Japan, where local accounting standards have substantially converged with IFRS but are more rules-based than principles-based IFRS. These different implementation approaches allow us to investigate how increased accounting flexibility influences recognition and measurement practices, attenuating the effects of accounting standard differences on the level of accounting rule existence or non-existence. We find that information asymmetry increases after voluntary IFRS adoption, which is driven by small- and medium-sized IFRS adopters’ decrease in earnings quality after voluntary IFRS adoption. Additional analyses reveal that firms’ reporting incentives and accounting resources influence these changes. These results suggest that IFRS’s increased accounting flexibility in recognition and measurement practices worsens the information environments of firms with weak incentives to commit to transparent financial reporting or fewer accounting resources (i.e., small- and medium-sized firms).

Keywords: International Financial Reporting Standards; Voluntary IFRS adoption; Information asymmetry; Earnings quality; Firm size; Japan (search for similar items in EconPapers)
JEL-codes: F36 G14 M41 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531924000424
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:riibaf:v:69:y:2024:i:c:s0275531924000424

DOI: 10.1016/j.ribaf.2024.102250

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().