Essay on Accounting: Stock Market and Specific Accounting Standards

Submitted By indy18
Words: 335
Pages: 2

Literature Review
This section would consist of five major parts which start from the previous articles in terms of the applications of event studies in the newly issued specific accounting standards as well as full-set accounting standards. Subsequently, the advantages and drawbacks with respect to the adopting IFRS would be extensively discussed. Last but not least, this paper would introduce previous research regarding the relationship between IFRS adoption and market reaction as the premise of following tests.

Previous Research regarding Adopting Specific Accounting Standards
Applying event study in the adoption of accounting standards has been extensively discussed. For instance, Leftwich (1981) tests if there is abnormal return while the two compulsory accounting standards, Accounting Principles Board Opinion No.16: Accounting for Business Combination and Opinion No.17: Accounting for Intangible Assets, are issued. It is found by Leftwich that there is negative impact on stock price provided these new standards cause adverse effect on firms. However, Dechow et al. (1996) indicate that there is no systematic evidence to support that investors reacted to news concerning mandatory expensing of stock options while FASB announcing Exposure Draft regarding stock compensation project. So far as the studies regarding newly accounting standards issued during the period of convergence stage in Taiwan are concerned, numerous domestic academic articles dedicate to uncovering…