IFRSs for financial instruments, quality of information and capital market’s volatility: an empirical assessment for Eurozone

Cuzman, Ioan and Dima, Bogdan and Dima (Cristea), Stefana Maria (2010): IFRSs for financial instruments, quality of information and capital market’s volatility: an empirical assessment for Eurozone. Published in: Journal of Accounting and Management Information Systems , Vol. 9, No. 2 (32) : pp. 284-304.

Abstract

This study examines the Eurozone stock markets’ reaction to a number of events associated with the post-implementation amendments of the IFRSs regarding financial instruments (IFRS 7, IFRS 9, IAS 32 and IAS 39). The adoption of these IFRSs is probably one of the most important recent changes in financial information environment. However, in order to contribute to an increase in financial stability, it is necessary to ensure an ex post stability of the regulatory framework. Based on this meta-argument, we have analyzed the inter-linkages between the episodes of higher market volatility and the amendments to the mentioned IFRSs, inside a binary dependent variable model. Overall, our findings suggest that the adoption of the IFRS can lead to a stabilization of European financial markets but this result is not necessary a robust one since investors prefer a higher stability on standards’ contents and application conditions.

• Item Type: MPRA Paper
• Language: English
• Keywords: IFRS 9, IFRS 7, IAS 32, IAS 39, volatility, event study
• Subjects: M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M41 - Accounting

References

Agostino, M., Drago, D. and Silipo D.B. (2008) “International Accounting Standards and Information Efficiency in the European Stock Market” available on-line http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1093278 accessed on October 25, 2009

Armstrong, C.S., Barth, M.E., Jagolinzer, A.D. and Riedl, E.J. (2008) “Market Reaction to the Adoption of IFRS in Europe”, available on-line at http://ssrn.com/abstract=903429 accessed on October 30, 2009

CESR (2009) “Application of Disclosure Requirements Related to Financial Instruments in the 2008 Financial Statements”, available on-line at http://www.iasplus.com/europe/ 0910cesrifrscompliance.pdf accessed on February 10, 2010

CFA Institute (2009) “International Financial Reporting Standards (IFRS). Financial Instrument Accounting Survey”, available on-line at http://www.cfainstitute.org/ centre/news/surveys/pdf/financial_instrument_accounting_report.pdf accessed on February 26, 2010

Dontoh, A., Radhakrishnan, S. and Ronen, J. (2000) “The Declining Value Relevance of Accounting Information and Non-Information-Based Trading: An Empirical Analysis”. New York University Accounting Working Papers, August, available on-line at http://hdl.handle.net/2451/27581 accessed on October 26, 2009

Elliott R. and Jacobsen, P. (1991) “U. S. accounting: A national emergency.”. Journal of Accountancy, November: 54-58

Epstein, L.G. and Schneider, M. (2008) “Ambiguity, Information Quality, and Asset Pricing”, Journal of Finance, vol. LXIII, no.1, February

Jenkins E. (1994) “An information highway in need of capital improvements”, Journal of Accountancy, 177 (May): 77-82

Papa, V. (2010) “IFRS 9 - A Perspective on Financial Instrument Accounting” available on-line at http://www.webcpa.com/news/IFRS-9-Perspective-Financial-Instrument-Accou nting-53015-1.html accessed on February, 27, 2010

Ramesh K. and Thiagarajan, R. (1995) “Inter-temporal decline in earnings response coefficients”, Working paper of Northwestern University, Evanston, IL.

Riffe, S. and Thompson, R. (1998) “The Relation between Stock Prices and Accounting Information”, Review of Accounting Studies, vol. 4, no. 2: 325-351

Sever M. and Boisclaire, R. (1990) “Financial reporting in the 1990s”, Journal of Accountancy, vol. 170, no. 5: 36-41

Violi, R. (2004) “Tax Systems, Financial Integration and Efficiency of European Capital Markets”, Ente per gli studi monetari, bancari e finanziari Luigi Einaudi, Quaderni di Ricerche, 58