IFRS adoption, information asymmetry and stock liquidity: Moderating effects of corporate governance mechanisms

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Abstract

The purpose of this paper is to test the impact of International Financial Reporting Standards (IFRS) adoption on information asymmetry, transaction transparency, and stock market liquidity. Furthermore, this study examined the direct and moderating effect of corporate governance devices on this relationship. We apply ordinary least squares (OLS) regression to examine changes in stock liquidity for French-listed firms between the pre-IFRS and the post-IFRS period. We show that IFRS adoption is well-perceived by financial statement users. Following Boubaker et al. (2019), R. and Firoz (2022), Bansal (2023), and Agrawal and Chakraverty (2023), we found that these standards have a positive impact on stock liquidity and a negative impact on information asymmetry. In addition, audit quality has a decisive role in improving information quality. However, contrary to expectations, the independent members of the board of directors do not exercise their role of control and monitoring efficiently. We conclude that the reporting process is influenced by firm-level characteristics, and we contribute to the literature by enhancing discussion on the debate related to the benefits of IFRS adoption. Our findings can be of interest to regulatory bodies and policymakers by providing a better understanding of the factors that influence stock liquidity and decision-making.

Keywords: IFRS, Corporate Governance, Mandatory Reporting, Audit Quality, Board of Directors, Stock Liquidity, Information Asymmetry

Authors’ individual contribution: Conceptualization — H.G.; Methodology — H.G.; Writing — Original Draft — H.G.; Writing — Review & Editing — H.G.; Supervision — A.O.; Project Administration — A.O.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: M40, M41, M42, M48, M49

Received: 27.09.2023
Accepted: 22.03.2024
Published online: 27.03.2024

How to cite this paper: Garrouch, H., & Omri, A. (2024). IFRS adoption, information asymmetry and stock liquidity: Moderating effects of corporate governance mechanisms. Corporate Governance and Sustainability Review, 8(1), 20–31. https://doi.org/10.22495/cgsrv8i1p2