RIEB Discussion Paper Series No.2018-21


The Effect of Voluntary IFRS Adoption on Information Asymmetry: Evidence from Japan


Prior research suggests that voluntary IFRS adoption is a commitment to more transparent financial reporting when domestic GAAP is significantly different from IFRS. It also suggests that accounting standards convergence results in enhanced comparability. Thus, the effect of the switch from converged accounting standards to IFRS is an open question. We investigate the effect of voluntary IFRS adoption on information asymmetry among investors in Japan, where domestic GAAP were significantly converged with IFRS before voluntary IFRS adoption was allowed. We do not find a statistically significant association between bid-ask spread, which is our proxy for information asymmetry, and IFRS adoption, suggesting that on average, voluntary IFRS adoption does not affects information asymmetry in Japan. We also find that the interaction term between IFRS adoption and firm size is statistically significantly negative, suggesting that for small firms, bid-ask spread increases after voluntary IFRS adoption.


Jong-Hoon KIM
Hitotsubashi University

Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059

Tohoku Gakuin University