Timing Equity Issuance in Response to Information Asymmetry Arising from IFRS Adoption in Australia and Europe

This study examines the association between changes in reported financial performance resulting from mandatory adoption of International Financial Reporting Standards (IFRS) and equity issuance during the transition period leading up to IFRS adoption for listed firms in Australia and Europe. We hypo...

Full description

Saved in:
Bibliographic Details
Published inJournal of accounting research Vol. 49; no. 1; pp. 257 - 307
Main Authors WANG, SHIHENG, WELKER, MICHAEL
Format Journal Article
LanguageEnglish
Published Malden, USA Blackwell Publishing Inc 01.03.2011
Wiley Subscription Services
Wiley Blackwell
Blackwell Publishing Ltd
SeriesJournal of Accounting Research
Subjects
Accounting standards
Asymmetric information
Australia
Business structures
Cash
Earnings
Equity
Equity financing
Europe
Financial management
Financial performance
Financial statements
Generally accepted accounting principles
Information asymmetry
Information sharing
International Financial Reporting Standards
Investors
Net income
Reconciliation
Studies
Australia
Europe
Online AccessGet full text

Cover

More Information
Summary:This study examines the association between changes in reported financial performance resulting from mandatory adoption of International Financial Reporting Standards (IFRS) and equity issuance during the transition period leading up to IFRS adoption for listed firms in Australia and Europe. We hypothesize that firms affected by the accounting standards change strategically time equity issuance around the time the firm discloses the effects of IFRS adoption on reported financial performance. We document circumstances where market returns are associated with the reconciliation of net income between local GAAP and IFRS. We find that a firm's likelihood of equity issuance and equity issue size during the three years prior to the IFRS reconciliation disclosure are negatively associated with the unexpected change in net income resulting from the conversion to IFRS.
Bibliography:istex:48632F68190F39CB81AA8ADAAB18BFEBF1CD2611
ark:/67375/WNG-0PVTTFX5-M
ArticleID:JOAR392
Data Availability: All data used in this study are publicly available.
We thank Daniel B. Thornton, Kee‐Hong Bae, T. J. Wong, Ole‐Kristian Hope, Huw Lloyd‐Ellis, Christine Wiedman, Danqing Young, Heather Wier, Michel Magnan, Srinivasan Sankaraguruswamy, Jinhan Pae, William R. Scott, the editor and an anonymous referee, seminar participants at Queen's University, University of Alberta, University of Waterloo, McGill University, Baruch College of CUNY, The Hong Kong University of Science and Technology, Chinese University of Hong Kong, The Hong Kong University, National University of Singapore, Simon Fraser University and University of Calgary, as well as participants of the 2009 AAA International Accounting Session Mid‐year Meeting for useful comments. We also appreciate funding from the Social Science and Humanities Research Council of Canada and KPMG and from Research Grants Council of Hong Kong that has helped make this research possible. All remaining errors are our own.
ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0021-8456
1475-679X
DOI:10.1111/j.1475-679X.2010.00392.x