Proceedings

Advisory Group (FCAG) which comprises around 20 senior leaders experienced in
international financial markets’ related aspects. The role of FCAG is to advise the two
Boards in regard to the implications that the financial crisis alongside the possible
changes in the global regulatory environment might have on standard-setting. In
relation to this, IASB has launched a number of projects (such as fair value
measurement and financial instruments). Moreover, IASB: had amended requirements
on the reclassification of some financial assets from fair value categories to amortized
cost categories; issued additional technical guidance on the determination of fair
values of financial assets in illiquid / inactive markets.
The literature seldom considers that IFRS adoption lead to an increase in the
understandability of financial statements for investors, financial analysts and other
users, these standards already representing the financial reporting framework
accepted for the issuers admittance on the main stock exchanges in the world (Mueller
et al., 1997).
In this context, the question that arises is the following:
Does the adoption of IFRS contribute to an increase in the informational efficiency of
the financial markets?
There are certain advantages of IFRS adoption – such as greater comparability of the
financial information and better disclosure to stakeholders – which may lead to a
decrease in the investors risks and uncertainty, leading to an increase in the
informational efficiency of the market and eventually minimizing the cost of capital
(Prather-Kinsey et al., 2008; Fogarty, 2008; Bova and Pereira, 2010). Comparability
contributes to the general objective of trust in the information given (Epstein and
Mirza, 2005). Thus, the IFRS intrinsically attempt to comprehensively respond to
investors’ needs in terms of information and economic guidance based on accounting
information (Rosenfield, 2005).
The literature review reveals that there are a few studies addressing directly the link
between the financial information provided by IFRS-based financial reports and
informational efficiency as defined by the “Efficient Market Hypothesis” - Fama
(1970; 1991) or the “Adaptive Market Hypothesis” - Lo (2004; 2005). Such an
example is represented by Lambert et al. (2006) which investigated the way in which
the voluntary adoption of IFRS before 2005 has contributed to the semi-strong form
of the European financial markets’ informational efficiency; and provided interesting
evidences regarding the potential use of IFRS in the investment decision making
process. However, we consider that the respective paper does not provide sufficient
empirical evidences which validate the semi-strong form on those markets. Thus, the
respective research direction remains open for further development.
With the aim of responding to our question it is essential to have first a complete and
stable set of financial reporting standards, condition which will probable be met not
prior to 2012. However, the issuance of a coherent set of standards is not the only
condition, another one may reside in extensive adoption of these standards on the
global financial markets. At the moment, more than 120 jurisdictions from around the
world permit or require IFRSs for domestic listed companies. Besides, the IFRS
adoption depends greatly on the status of the convergence process between IASB and
US FASB and on the standpoints of the US Securities and Exchange Commission
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