Differential Information, Price, and Volume Responses at IFRS and U.K. GAAP Earnings Announcement Dates

• In Event: IFRS and Regional GAAP Comparisons

Abstract

This paper examines price and trading volume reactions to IFRS earnings announcements of U.K. firms cross-listed in U.S. stock exchanges. Specifically, we test whether U.S. investors are able to interpret and use IFRS accounting reports in making their trading and investment decisions. Regulators concern themselves with how U.S. market participants react to and interpret IFRS earnings disclosures, as it is important in improving both the transparency and comparability of financial reporting. This paper focuses on the implications of shifting from U.S. GAAP toward the more principle-based standards provided by IFRS, motivated by talks to converge the two systems of standards. Our results provide evidence that unexpected returns as well as the volume of shares traded increase during IFRS-based earnings release dates. This evidence lends support to the belief that U.S. market participants find IFRS accounting output useful and relevant in their valuations of U.K. firms. Moreover, our findings support the assumption that IFRS earnings releases influence share liquidity and trading in U.S markets.

Authors

• Kingsley O Olibe, Kansas State University

• Jeffrey William Strawser, Sam Houston State University

• William Robert Strawser, University of Colorado at Denver