The Market Reaction to the Adoption of IFRS in the European Insurance Industry
This study examines the market reaction of the European insurance industry to the adoption of International Financial Reporting Standards (IFRS) in Europe. Using an event study methodology, we find that investors in the insurance industry reacted favourably to most of the events that led to the adoption of IFRS. However, the positive reaction is not consistent across all events, which may reveal some investor concern as to whether the benefits of IFRS adoption (i.e. comparability and transparency) exceed the costs (i.e. increase audit fees and/or managerial discretion). We also find that investors’ reaction to IFRS adoption differs between life and non-life insurers. Specifically, our multivariate results show that investors in the non-life insurance industry react more favourably to IFRS adoption, which indicates that they anticipate the benefits of IFRS will exceed the costs.
KeywordsIFRS European insurance companies market reaction expected return accounting reforms life insurance non-life insurance
We would like to thank anonymous referees as well as Professor Narjess Boubakri for their valuable comments and suggestions which helped improve the paper. We also thank participants at the British Accounting and Finance Association (BAFA) Annual Conference 2012, U.K., and participants at the 10th Financial Risks Forum 2017, Paris, France. We would also like to thank the guest editor of the Regulation issue, Professor Helmut Gründl, Editor-in-Chief, Professor Christophe Courbage, and Editorial Manager, Mrs. Sandra Postle for their valuable time and efforts.
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