The Adoption of the IFRS in the European Union - A study of potential harmonization effects across European capital markets
Abstract: This study investigates potential harmonization effects of capital market reactions in the EU with regards to the mandatory implementation of IFRS for listed firms. We compare data from two periods of different prevailing accounting regimes, from five EU member states of which the UK serves as a benchmark for changes in market reactions. Using value relevant measures to evaluate capital market reactions, we test for alterations in the response coefficients for book value per share and earnings per share, following the transition to the IFRS. The study shows a conjugation of market reactions towards the benchmark in the period of mandatory IFRS reporting. We find that the effects of national differences on market reactions no longer render a statistically significant difference between the reactions of the benchmark's and tested countries' markets, after the implementation of the IFRS.
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