How does the IFRS adoption affect systematic versus idiosyncratic risks of French listed companies?

Habiba Mrissa Bouden () and Moufida Ben Saada
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Habiba Mrissa Bouden: Center of Research on Risk, Economic Issues and Public Policies (CRREP), Department of Accounting and Finance, Institute of Higher Commercial Studies of Sousse (IHCS), University of Sousse, Road Hzamia Sahloul 3, BP No. 40, 4054 Sousse, Tunisia
Moufida Ben Saada: Department of Accounting and Finance, High Institute of Computer Science and Management of Kairouan, Road Khemais El Alouini, 3100 Kairouan, Tunisia

International Journal of Financial Engineering (IJFE), 2022, vol. 09, issue 03, 1-26

Abstract: In this paper, we explore the impact of International Accounting Standards/International Financial Reporting Standards (IAS/IFRS) adoption on the French listed firms’ pricing in terms of performance, systematic risk aversion, idiosyncratic and systematic risks from 2001 to 2008. Unlike previous studies, we adopt a risk decomposition into systematic and idiosyncratic components to study the IAS/IFRS adoption effect. A modified market model (MMM) is used to allow time-varying variance on the one hand, and parameters changing over periods on the other hand. Our findings show that IFRS adoption reduces idiosyncratic risk, leads to a vanish in systematic risk, increases the systematic risk aversion, and improves the speed of information adjustment. We underscore the role of IFRS in enhancing the stocks’ informational efficiency. Our results help investors in their investment decisions as well as accounting professionals and market makers in the design of relevant accounting and financial policies.

Keywords: IFRS; information asymmetry; systematic risk; idiosyncratic risk; price informativeness (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S2424786322500086

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