Market reaction to and valuation of IFRS reconciliation adjustments: first evidence from the UK

Market reaction to and valuation of IFRS reconciliation adjustments: first evidence from the UK We investigate the market reaction to, and the value-relevance of, information contained in the mandatory transitional documents required by International Financial Reporting Standards 1 (2005). We find significant negative abnormal returns for firms reporting negative earnings reconciliation. Although the informational content of the positive earnings adjustments is value-relevant before disclosure, for negative earnings adjustments it is value-relevant only after disclosure. This finding is consistent with managers delaying the communication of bad news until IFRS compliance. A finer model shows that adjustments attributed to impairment of goodwill, share-based payments, and deferred taxes are incrementally value-relevant but that only the impairment of goodwill and deferred taxes reveal new information. Our results indicate that mandatory IFRS adoption alters investors’ beliefs about stock prices. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Market reaction to and valuation of IFRS reconciliation adjustments: first evidence from the UK

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Publisher
Springer US
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1007/s11142-009-9108-5
Publisher site
See Article on Publisher Site

References

  • Domestic accounting standards, International Accounting Standards, and the predictability of earnings
    Ashbaugh, H; Pincus, M
  • The effects of cross-sectional scale differences on regression results in empirical accounting research
    Barth, ME; Kallapur, S

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