Adoption of international accounting standards IFRS and Bid-Ask Spread: analysis and discussion

Abstract

Resolving information asymmetry issues between investors and managers is one of the primary goals of adopting IFRS. Disclosure of financial information facilitate the comparability of financial statements and reduce information asymmetries On the other hand, the application of IFRS is inevitably dependent on the nature of the institutional and cultural environments of the countries where companies operate and where individuals make accounting decisions. Investors are interested in knowing if information asymmetry problems are reduced after IFRS/IAS adoption, which help them to make more effective investment decisions. The price range is used as an indicator of information asymmetry. The goal of this paper is to identify, present and analyze all the literature review and to answer the following question: What is the impact of the adoption of international accounting standards on the price band as a measure of information asymmetry? We have analyzed all the scientific research dealing with this variable as a measurement criterion and the results of this study are consistent with the expectations of the international standard-setter, according to which IFRS represent a real means for decreasing information asymmetry, which contributes to the efficient and cost-effective functioning of the market by guaranteeing a high level of transparency and comparability of financial reporting. However, the majority of studies analyzing the impact of international accounting standards on the price range are carried out in developed countries with strong economies, which leads us to the following question: do IFRS also reduce information asymmetry in emerging countries or is this benefit only available in developed countries?

Classification JEL: P43, F5.  

Paper type: Theoretical Research