The Impact of IFRS Adoption on Information Asymmetry: Evidence from Takeovers

This study analyzes the impact of the adoption of International Financial Reporting Standards (IFRS) on information asymmetry from the perspective of mergers and acquisitions (M&A), which provides a convenient research setting for observing the market’s direct reaction to a takeover announcement. As M&A transactions come with waves that have different traits, the whole period of 1995–2005 is analyzed by considering the sixth merger wave, which took place in its entirety in this period, as the base wave. In other words, the whole period is divided into three (pre-sixth merger wave, sixth merger wave, and after sixth merger wave) subperiods. For each subperiod, we calculate excess cumulative abnormal returns (CAR), which are the proxy for information asymmetry. Target (acquired) firms, which are listed on stock exchanges in Australia, France, and the United Kingdom, are analyzed to reveal the effect of IFRS adoption on information asymmetry. Our outcomes robustly reveal that IFRS adoption does not have a statistically significant association with excess CAR figures. We further reperform analyses by only considering the period of the sixth merger wave in which IFRS adoption takes place, and this insignificant association remains the same. Overall, our outcomes do not provide evidence for the negative impact of IFRS adoption on information asymmetry.