Re-examining the impact of mandatory IFRS adoption on IPO underpricing

Public Peers, Accounting Comparability, and Value Relevance of Private Firms’ Financial Reporting

“…Following prior research (e.g., Balachandran and Mohanram 2011;Barth et al 2012), we winsorize all variables used in our analyses at the 1% and 99% levels of the respective base samples to further mitigate the effect of outliers on our inferences. 21 Byard et al (2021) highlight the importance of understanding other institutional details surrounding the 2005 IFRS introduction. Many of these changes, including the so-called IFRS regulation (EC/1606/2002) and the IPO prospectus directive (2003/71/EC), apply to firms listed on "EU-regulated" markets but not to firms listed on "exchange-regulated" markets.…”

“…Many of these changes, including the so-called IFRS regulation (EC/1606/2002) and the IPO prospectus directive (2003/71/EC), apply to firms listed on "EU-regulated" markets but not to firms listed on "exchange-regulated" markets. Firms listed on both markets are publicly listed firms, i.e., their shares are traded on stock exchanges, and firms can generally choose to list on an EU-regulated market or an exchange-regulated market (Byard et al 2021;Pierk 2018). However, since our research question and main analyses focus on within private firm variation, neither the IFRS regulation nor the IPO prospectus directive applies.…”

Does Public Firms’ Mandatory IFRS Reporting Crowd Out Private Firms’ Capital Investment?

“…Relatedly,Daske et al [2008] andChristensen et al [2013] find that public firm early adopters still experience a strong liquidity effect around the IFRS mandate and suggest concurrent changes in enforcement as a potential reason.33 We obtain the list of EU unregulated markets by excluding regulated markets indicated by the law firm CMS Cameron McKenna: https://cms-lawnow.com/-/media/files/regzone% 20/reports/smart-pdf/database-of-regulated-markets.pdf (A database of regulated markets across the EEA, retrieved in January 2021). We cross check the information both with European Securities and Markets Authority website (https://registers.esma.europa.eu/publication/ searchRegister?core=esma_registers_upreg) and with related recent studies (e.g.,Christensen et al [2016],Byard, Darrough, and Suh [2021]). 34 For instance, Australia signed free trade agreements in 2004 (just before its IFRS adoption in 2005) with the United States and Thailand.…”

Country‐level Accounting Enforcement and IPO Underpricing

“…Banerjee et al (2011) use two proxies to measure information asymmetry: country-level analyst following, and country-level stock price synchronicity, which they find to be negatively and positively associated with underpricing, respectively. Shi et al (2013) report that the stringency of disclosure requirements for IPO prospectuses-as measured by La Porta et al (2006)-is negatively associated with IPO underpricing, using a sample from 1995-2002. Byard et al (2021 show that the adoption of the EU's Prospectus Directive significantly reduces IPO underpricing.…”

“…Byard et al . (2021) show that the adoption of the EU's Prospectus Directive significantly reduces IPO underpricing. However, they are unable to confirm a negative association between mandatory IFRS adoption and IPO underpricing, as found by Hong et al .…”