The Market Reaction to the Adoption of IFRS in the European Insurance Industry

Abed Al-Nasser Abdallah (), Wissam Abdallah and Feras M. Salama ()
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Abed Al-Nasser Abdallah: American University of Sharjah
Feras M. Salama: American University of Sharjah

The Geneva Papers on Risk and Insurance - Issues and Practice, 2018, vol. 43, issue 4, No 5, 653-703

Abstract: Abstract This study examines the market reaction of the European insurance industry to the adoption of International Financial Reporting Standards (IFRS) in Europe. Using an event study methodology, we find that investors in the insurance industry reacted favourably to most of the events that led to the adoption of IFRS. However, the positive reaction is not consistent across all events, which may reveal some investor concern as to whether the benefits of IFRS adoption (i.e. comparability and transparency) exceed the costs (i.e. increase audit fees and/or managerial discretion). We also find that investors’ reaction to IFRS adoption differs between life and non-life insurers. Specifically, our multivariate results show that investors in the non-life insurance industry react more favourably to IFRS adoption, which indicates that they anticipate the benefits of IFRS will exceed the costs.

Keywords: IFRS; European insurance companies; market reaction; expected return; accounting reforms; life insurance; non-life insurance (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1057/s41288-018-0088-1

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