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IFRS Adoption and Stock Prices of Japanese Firms in Governance System Transition

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  • Sato, Shun
  • Takeda, Fumiko

Abstract

This study examines firms' decision to voluntarily adopt IFRS in a setting where there are changes to the governance system in a traditionally code law country, as well as how the market responds to such decisions. We find the probability of voluntary IFRS adoption to be higher among firms that have a high proportion of foreign shareholders, undertake quality audits, have low levels of leverage, feature a nominating committee, and are included in the new market index. In addition, the stock prices of IFRS adopters tend to increase around the announcement date of IFRS adoption, compared to those of non-adopters. Finally, market reactions are smaller for firms that feature a nominating committee, and are included in the new market index—perhaps because IFRS adoption by these firms is less surprising to market participants, and because IFRS adoption is not expected to add large incremental value to these firms.

Suggested Citation

  • Sato, Shun & Takeda, Fumiko, 2017. "IFRS Adoption and Stock Prices of Japanese Firms in Governance System Transition," The International Journal of Accounting, Elsevier, vol. 52(4), pages 319-337.
    • Handle: RePEc:eee:accoun:v:52:y:2017:i:4:p:319-337
    DOI: 10.1016/j.intacc.2017.09.002
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    Cited by:

    1. Vafeas, Nikos, 2017. "A Discussion on “IFRS Adoption and Stock Prices of Japanese Firms in Governance System Transition”," The International Journal of Accounting, Elsevier, vol. 52(4), pages 338-340.
    2. Wenjun Kuang, 2023. "Accounting comparability and the accuracy of management earnings forecasts in Japan," Discussion Papers in Economics and Business 23-07, Osaka University, Graduate School of Economics.
    3. Reiko Kashiwazaki & Shun Sato & Fumiko Takeda, 2019. "Does IFRS Adoption Accelerate M&A? The Consequences of Different Goodwill Accounting in Japan," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 25(4), pages 399-415, November.
    4. Konosuke Shimamoto & Fumiko Takeda, 2020. "IFRS Adoption and Accounting Conservatism of Japanese Firms with Governance System Transition," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 26(2), pages 161-173, May.
    5. Ines Kateb & Ines Belgacem, 2024. "Navigating governance and accounting reforms in Saudi Arabia's emerging market: impact of audit quality, board characteristics, and IFRS adoption on financial performance," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(2), pages 290-312, June.

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