Market Reaction to the Adoption of International Financial Reporting Standard in Indonesia

Authors

  • Yen Sun Bina Nusantara University
  • Evi Steelyana Bina Nusantara University
  • Yoyo Cahyadi Bina Nusantara University

DOI:

https://doi.org/10.21512/bbr.v5i2.1005

Keywords:

market reaction, IFRS, abnormal return

Abstract

The aim of the study is to analyze the market’s reaction on the adoption of International Financial Reporting Standard (IFRS) in Indonesia. Investor reaction will be perceived by the existence of abnormal return as well as the difference of trading volume. The analysis tool used is One-sample test to assess the existence of abnormal return and Paired Sample T-test to observe the difference trading volume 3 days before and after the announcement of financial report. The sample was constituted by 31 Indonesian companies randomly selected listed on LQ45 and have been impacted by the adoption of IFRS since 2011. The result shows that there is no abnormal return 3 days before and after the announcement of financial report. However, there is abnormal return on the day of announcement. Trading volume shows there is no market reaction to the IFRS adoption 3 days before and after the announcement.

Dimensions

Plum Analytics

Author Biographies

Yen Sun, Bina Nusantara University

Accounting and Finance Department

Evi Steelyana, Bina Nusantara University

Accounting and Finance Department

Yoyo Cahyadi, Bina Nusantara University

Accounting and Finance Department

References

Armstrong, S., Barth, E., Jagolinzer, A. and Riedl, E. (2009). Market reaction to the adoption of I.F.R.S in Europe. Working Paper Series, Accounting Review forthcoming.

Botosan, C. (2006). Disclosure and the cost of capital: What do we know. Account. Bus. Res, 36, 31–

Karamanou, I. & Nischiotis, G. (2005). The valuation effects of firms voluntary adoption of international accounting standards. Working Paper. University of Cyprus.

Klimczak, K. M. (2011). Market reaction to mandatory IFRS adoption: Evidence from Poland. Accounting and Management Information Systems, 10(2), 228–248.

Latridis, G. (2010). International Financial Reporting Standards and the quality of Financial statement

information. International Review of Financial Analysis, 19, 193–204

Vazakidis, A. & Athianos, S. (2010). Measuring Investors’ Reaction to the Adoption of International Financial Reporting Standards in Greece, Using a Market-Based Model. American Journal of Economics and Business Administration, 2(1), 103–112.

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Published

2014-11-28
Abstract 415  .
PDF downloaded 334  .