| Scope and method of study. This study evaluates whether firms realize benefits from relatively greater compliance with International Accounting Standards (IAS). Firm benefits are operationalized as reductions in information asymmetry, as proxied by lower bid-ask spreads, analyst forecast dispersion, and idiosyncratic risk. Whereas past studies of the effect of IAS compliance often use a dichotomous evaluation of compliance, this study applies a more robust measure to assess the extent of compliance. This study also explores how other variables such as analyst following, auditor confirmation of accounting standards use, country, earnings variability, firm size, and trading volume might affect the information asymmetry proxies.; Findings. The results indicate that relatively greater compliance with IAS is not associated with a statistically significant difference in the proxies for information asymmetry. Differing levels of bid-ask spreads, analyst forecast dispersion, and idiosyncratic risk are apparently best explained by factors unrelated to IAS compliance. Among these other factors, there is evidence that earnings variability, firm size, and trading volume are associated with differing levels of information asymmetry. There is also evidence that the auditor's confirmation of the use of IAS impacts a firm's bid-ask spread and its idiosyncratic risk, but not its forecast dispersion. |
