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The consequences of mandatory IFRS and transparency directive on synchronicity in EU markets

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Defense Thèse de doctorat : Univ. Genève, 2017 - GSEM 42 - 2017/05/24
Abstract This study investigates the impact of mandatory adoption of International Financial Reporting Standards (IFRS) and the implementation of Transparency Directive (TD) on the flow of firm-specific information using stock price synchronicity. Using a sample of 11,717 firm-year observations from 15 EU countries that mandatorily adopted IFRS for the first time in 2005 and covering the period 2002-2010, I provide evidence that around the time of mandatory IFRS adoption the flow of firm-specific information enhanced and the ability of investors to predict firm-specific future events improved as a result of this information enhancement. Additional tests show that these benefits are larger for firms from countries with weak legal enforcement, poor investor protection, and high-level of disclosure opaqueness and for firms in countries that did not make concurrent changes in reporting enforcement. More importantly, this study shows that IFRS had a limited role in enhancing the flow of firm-specific information and that Market Abuse Directive (MAD) implementation in 2005 is the main driver of the observed information benefits. With respect to TD, I employ a focused sample of 14,802 firm-year observations covering all publicly-listed firms in 11 EU countries that implemented TD in 2007 and before the 2008-2009 financial crisis. The results show that TD implementation had no enhancement effect on the flow of firm-specific information for either strong or weak institutional infrastructures countries. This evidence is consistent with the expectation of the European Commission (EC) that with regard to economic impacts, TD seems to be “neutral”. Overall, this study sheds light on the informational implications of mandatory disclosure regulations that were implemented in the European Union (EU) and the role of country-level institutional mechanisms in determining these implications.
Keywords Accounting qualityMandatory Disclosure RegulationsInformation EnvironmentEuropean Union (EU)EU Financial MarketsCountry-Level Institutional EnvironmentEnforcement Changes
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URN: urn:nbn:ch:unige-950405
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ALZEBDIEH, Rami. The consequences of mandatory IFRS and transparency directive on synchronicity in EU markets. Université de Genève. Thèse, 2017. https://archive-ouverte.unige.ch/unige:95040

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Deposited on : 2017-06-23

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