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Market reaction to and valuation of IFRS reconciliation adjustments : first evidence from the UK
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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. doi:10.1007/s11142-009-9108-5 ISSN 1380-6653.
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Official URL: http://dx.doi.org/10.1007/s11142-009-9108-5
Abstract
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.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > H Social Sciences (General) H Social Sciences > HG Finance |
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Divisions: | Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School |
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Journal or Publication Title: | Review of Accounting Studies | ||||||||
Publisher: | Springer New York LLC | ||||||||
ISSN: | 1380-6653 | ||||||||
Official Date: | 1 December 2010 | ||||||||
Dates: |
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Volume: | 15 | ||||||||
Number: | 4 | ||||||||
Page Range: | pp. 725-751 | ||||||||
DOI: | 10.1007/s11142-009-9108-5 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 10 August 2020 | ||||||||
Open Access Version: |
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