The impact of IFRS 13 implementation on information asymmetry and liquidity in Nordic real estate markets

Abstract: The overall objective of financial reporting is to provide information that is useful for investors and other stakeholders. The implementation of the International Accounting Standard 40 (IAS 40) in 2005 by public companies in the EU securities market required firms to disclose the fair value of their investment properties. In 2013, International Financial Reporting Standard 13 (IFRS 13) was implemented with additional guidance on fair value measurement, making the fair value measurement and disclosure more standardized between companies applying the standard. Previous studies have shown that IAS 40 implementation reduced information asymmetry and improved liquidity among real estate companies in the European Union (EU) and that IFRS 13 implementation improved quality of disclosure. We investigate if IFRS leads to further reduction on information asymmetry and increase in liquidity in the Nordic real estate market. We do not observe any significant effect of post IFRS 13 on information asymmetry and liquidity. This can be an indication that IFRS 13 did not help to reduce the uncertainty around fair value valuation for investment properties.