Journal ArticleDOI
Does Mandatory IFRS Adoption Affect Crash Risk
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TLDR
This article examined the impact of mandatory IFRS adoption on firm-level "crash risk", defined as the frequency of extreme negative stock returns, and found that crash risk decreases relatively more among industrial firms where IFRS results in more credible changes to local GAAP.Abstract:
We examine the impact of mandatory IFRS adoption on firm-level “crash risk,” defined as the frequency of extreme negative stock returns. An important feature of our study is that we separately analyze industrial firms and firms in finance-related industries. This is important because IFRS adoption is likely to affect industrial firms through different mechanisms than financial firms, and as a result may affect crash risk differently. We find that for companies in poor information environments, crash risk decreases among industrial firms and increases among financial firms after the IFRS mandate. We also find that crash risk decreases relatively more among industrial firms where IFRS results in more credible changes to local GAAP, and that crash risk increases relatively more among banks with less restrictive regulations. In addition, we find that earnings volatility declines after IFRS adoption for industrial firms but increases for financial firms. Overall, our findings are consistent with mandatory IFRS adoption decreasing crash risk among industrial firms by improving reporting quality, and increasing crash risk among financial firms by inducing greater volatility and affording more opportunities for manipulation.read more
Citations
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CEO Overconfidence and Stock Price Crash Risk
TL;DR: This article examined the association between chief executive officer (CEO) overconfidence and future stock price crash risk and found that firms with overconfident managers overestimate the returns to their investment projects and misperceive negative net present value (NPV) projects as value creating.
Journal ArticleDOI
Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences
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Financial statement comparability and expected crash risk
TL;DR: This paper examined the impact of financial statement comparability on ex ante crash risk and found that expected crash risk decreases with comparability, and this negative relation is more pronounced in an environment where managers are more prone to withhold bad news.
Journal ArticleDOI
A review of the IFRS adoption literature
TL;DR: The authors reviewed the literature on the effects of International Financial Reporting Standards (IFRS) adoption and provided a cohesive picture of empirical archival literature on how IFRS adoption affects: financial reporting quality, capital markets, corporate decision making, stewardship and governance, debt contracting, and auditing.
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A review of the IFRS adoption literature
TL;DR: The authors reviewed the literature on the effects of International Financial Reporting Standards (IFRS) adoption and provided a cohesive picture of empirical archival literature on how IFRS adoption affects: financial reporting quality, capital markets, corporate decision making, stewardship and governance, debt contracting, and auditing.
References
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Journal ArticleDOI
Home Bias, Foreign Mutual Fund Holdings, and the Voluntary Adoption of International Accounting Standards
TL;DR: In this paper, the authors test the assertion that a consequence of voluntarily adopting International Accounting Standards (IAS) is the enhanced ability to attract foreign capital and find that average foreign mutual fund ownership is significantly higher among IAS adopters.
Journal ArticleDOI
Bank Governance, Regulation, and Risk Taking
TL;DR: In this article, the authors conduct an empirical assessment of theories concerning relationships among risk taking by banks, their ownership structures, and national bank regulations, and show that bank risk taking varies positively with the comparative power of shareholders within the corporate governance structure of each bank.
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Expected Idiosyncratic Skewness
TL;DR: In this article, the authors test the prediction of recent theories that stocks with high idiosyncratic skewness should have low expected returns and find that expected idiosyncratic skewwness and returns are negatively correlated.
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The Information Content of Annual Earnings Announcements and Mandatory Adoption of IFRS
TL;DR: In this paper, the authors examined whether the information content of earnings announcements increases in countries following mandatory IFRS adoption, and conditions and mechanisms through which increases occur, and found evidence of three mechanisms that increase information content: reducing reporting lag, increasing analyst following, and increasing foreign investment.
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Marking to Market: Panacea or Pandora's Box?
TL;DR: In this article, the authors show that the damage done by marking to market is greatest when claims are (i) long-lived, (ii) illiquid, and (iii) senior.