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The Effect of International Financial Reporting Standards Adoption on the Relation Between Earnings Quality and Information Asymmetry in Korea

Author

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  • Kwanghee Cho
  • Kyoung-min Kwon
  • Han Yi
  • Yongsuk Yun

Abstract

Whereas prior studies provide mixed results on whether the adoption of International Financial Reporting Standards (IFRS) either improves earnings quality or lowers information asymmetry, none examines whether the adoption has indeed altered the assumed negative relation between earnings quality and information asymmetry. Using Korean data with a difference-in-difference design, we address the question by examining whether IFRS adoption has strengthened the assumed negative relation. We fail to document such evidence. This study raises questions regarding the validity of prior studies’ findings that IFRS adoption has helped capital market participants in Korea via improved earnings quality or lower information asymmetry.

Suggested Citation

  • Kwanghee Cho & Kyoung-min Kwon & Han Yi & Yongsuk Yun, 2015. "The Effect of International Financial Reporting Standards Adoption on the Relation Between Earnings Quality and Information Asymmetry in Korea," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(S3), pages 95-117, May.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:s3:p:95-117
    DOI: 10.1080/1540496X.2015.1039905
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    Citations

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    Cited by:

    1. Kim, Jong-Hoon & Fujiyama, Keishi & Koga, Yuya, 2024. "The effect of voluntary international financial reporting standards adoption on information asymmetry in the stock market: Evidence from Japan," Research in International Business and Finance, Elsevier, vol. 69(C).
    2. Bajra, Ujkan & Čadež, Simon, 2018. "Audit committees and financial reporting quality: The 8th EU Company Law Directive perspective," Economic Systems, Elsevier, vol. 42(1), pages 151-163.
    3. Lee, Woo Jae & Choi, Seung Uk, 2024. "The effect of the new revenue recognition principle (IFRS 15) on financial statement comparability: Evidence from Korea," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 54(C).
    4. Woo Jae Lee, 2019. "Toward Sustainable Accounting Information: Evidence from IFRS Adoption in Korea," Sustainability, MDPI, vol. 11(4), pages 1-17, February.
    5. Isabel Costa Lourenço & Raquel Sarquis & Manuel Castelo Branco & Nuno Magro, 2018. "International Differences in Accounting Practices Under IFRS and the Influence of the US," Australian Accounting Review, CPA Australia, vol. 28(4), pages 468-481, December.
    6. Ramzi Benkraiem & Itidel Bensaad & Faten Lakhal, 2022. "How do International Financial Reporting Standards affect information asymmetry? The importance of the earnings quality channel," Post-Print hal-03545070, HAL.
    7. Zhang, Xiaotao & Wang, Ziqiao & Hao, Jing & He, Feng, 2022. "Price limit and stock market quality: Evidence from a quasi-natural experiment in the Chinese stock market," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    8. Dyussembina, Saule & Park, Kunsu, 2024. "Book-tax differences, dividend payout, and firm value," International Review of Financial Analysis, Elsevier, vol. 91(C).
    9. Benkraiem, Ramzi & Bensaad, Itidel & Lakhal, Faten, 2022. "How do International Financial Reporting Standards affect information asymmetry? The importance of the earnings quality channel," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 46(C).

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