IFRS reporting, firm-specific information flows, and institutional environments: international evidence

Jeong-Bon Kim () and Haina Shi ()
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Jeong-Bon Kim: City University of Hong Kong
Haina Shi: Fudan University

Review of Accounting Studies, 2012, vol. 17, issue 3, No 2, 474-517

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: G14 M16 M48 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1007/s11142-012-9190-y

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