Voluntary IFRS Adoption and Stock Price Synchronicity : Do Analyst Following and Institutional Infrastructure Matter?

This study investigates whether and how a firm's voluntary adoption of International Financial Reporting Standards (IFRS) influences stock price synchronicity or the extent to which firm-specific information is capitalized into stock prices. We also study the role of analyst following and institutional infrastructure in determining the relation between IFRS adoption and synchronicity. Using firm-level data from 34 countries, we find that synchronicity is significantly lower for IFRS adopters than for non-adopters across all regression specifications, and that for IFRS adopters, it decreases from the pre-adoption period to the post-adoption period.This finding supports the view that voluntary IFRS adoption facilitates the incorporation of firm-specific information into stock prices. We also find that the synchronicity-reducing effect of IFRS adoption is attenuated (accentuated) for firms with high (low) analyst following, and is stronger (weaker) for firms in countries with poor (good) institutional infrastructures. The above results are robust to a variety of sensitivity checks