The effects of industry characteristics on stock price synchronicity around IFRS adoption

Past decade has witnessed several changes in the process of conduct of business activities across the world especially due to the wave of globalization. It has also made drastic changes in the process of financial reporting, in particular the continuing adoption of IFRS (International Financial Reporting Standards) worldwide. IFRS are high quality, understandable, enforceable and globally acceptable accounting standards issued by IASB (International Accounting Standard Board). Thus these are a set of international accounting standards stating how a particular type of transaction and other events should be reported in the financial statements. Thus IFRS are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. IFRS is becoming the global language of business with over 40% of the world adopting this as their standard for reporting. India also decided to converge to IFRS from 1st April 2016 in a phased manner, which in turn improves the financial statement comparability and transparency that helps to attract greater cross border investments. This paper focuses on the convergence of IFRS with Indian Accounting Standards, its utility, issues and challenges faced by the stakeholders. It also throws light to the ways through which problems can be addressed.

The quality of financial report and the extent to which investors rely on them to forecast future earnings is dependent on the accounting standards employed. The impact of IFRS adoption on earnings predictability of listed banks in Nigeria was examined in this study considering a sample of 11 listed banks in Nigeria. Categorically, data were obtained from the financial statement 2013 to 2014 (post-adoption period) and 2010 to 2011 (pre-adoption period). The data obtained were analyzed using regression on the Statistical Package for Social Sciences (SPSS). The study found a decrease in the ability of current earnings to predict future earnings after the adoption period. Thus, IFRS adoption has a negative impact on earnings predictability. The study further suggested that regulatory bodies of the banking sector should enforce strict adherence to IFRS procedures and principles, as well as put in place measures that will improve investors’ protection.

This study investigates whether the value relevance of accounting information was changed after IFRS adoption in South Korea. Related prior studies have found mixed empirical evidence depending on research methodologies or research periods. Moreover, the effect of IFRS adoption on value relevance can be different between Korean stock markets (KSE and KOSDAQ) because they have different characteristics. Also, the main financial statements reported by Korean firms had changed from individual financial statements to consolidated financial statements after IFRS adoption. Thus, this study analyzes the effect of IFRS adoption on the value relevance of individual and consolidated accounting numbers expanding research periods (5 years before and after IFRS adoption) and comparing changes in explanatory powers of Ohlson (1995) model on each listing market. The empirical results indicate that the value relevance of Korean listed firms generally decreased after IFRS adoption. However, the value relevance of KSE listed firms decreased, while the value relevance of KOSDAQ listed firms increased after IFRS adoption. In addition, it was found that the effects of IFRS adoption on value relevance of individual and consolidated financial information were different depending on listed markets. This implies that different level of demand for information environment may induce differential effects of IFRS adoption on value relevance.