Horton, Joanne and Serafeim, George (2010) Market reaction to and valuation of IFRS reconciliation adjustments: first evidence from the UK. Review of Accounting Studies, 15 (4). pp. 725-751. ISSN 1380-6653
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.
|Additional Information:||© 2009 Springer Science + Business Media, LLC|
|Library of Congress subject classification:||H Social Sciences > HF Commerce > HF5601 Accounting|
|Sets:||Departments > Accounting|
|Date Deposited:||07 Mar 2011 16:34|
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