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Information Asymmetry in the Post-IFRS Adoption Period: Evidence from Developing Countries

Juniarti, and MARCELLINA, BEATRICE and HENTIKA, ALVITA ANGELA (2018) Information Asymmetry in the Post-IFRS Adoption Period: Evidence from Developing Countries. Accounting and Finance Review, 3 (4). pp. 114-123. ISSN E-ISSN 0128-2611, ISSN 2636-915X

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      Abstract

      bjective - The adoption of IFRS aims to reduce the level of information asymmetry. Prior studies conducted in developed countries prove that the adoption of IFRS enhances transparency and diminishes information asymmetry. However, in developing countries with a low level of openness, limited regulation, and more centralized ownership, the ability of IFRS to reduce information asymmetry remains unknown. To address this issue, this study aims to investigate whether IFRS adoption will reduce information asymmetry in some developing countries in South East Asia. Methodology/Technique - This research is applied in three developing countries: Indonesia, the Philippines and Thailand. Information asymmetry is proxied by the cost of capital using the Easton model (2004) and a bid-ask spread. Listed firms from the three countries are selected as the research sample resulting in 5.313 firm-years for the period between 2007 and 2016. Findings - This study concludes that the adoption of the IFRS decreases information asymmetry in developing countries. These finding confirm that the benefit of the adoption is the same as in developed countries, despite the level of law enforcement in developing countries being lower. Managers, standard authorities and investors must note that the IFRS conveys benefits to the market, which increases transparency by asking lower returns and valuing company stocks appropriately. Novelty - This study examines the benefits of the adoption of the IFRS in reducing information asymmetry in some emerging countries to enhance the generalization of the results from prior studies that are mostly conducted in developed countries.

      Item Type: Article
      Uncontrolled Keywords: Bid-ask Spread; Cost of Capital; Information Asymmetry; IFRS Adoption.
      Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
      Divisions: Faculty of Economic > Accounting Department
      Depositing User: Admin
      Date Deposited: 05 Jan 2019 12:05
      Last Modified: 07 Sep 2019 00:05
      URI: http://repository.petra.ac.id/id/eprint/18506

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