Abstract:
This Research examines the effect of introducing international accounting standards (IASs) on the Jordanian Stock Exchange during the period 1990-1991. Literature on accounting standards in general and IASs in particular is reviewed for the likely effects of IASs adoption in Jordan> A research methodology is developed using data from Jordanian IAS adopting firms (experimental group) and IAS non-adopters (control group) for 100 and 1991 respectively> Sub-portfolios are then constructed representing the financial sector, the service sector, the industrial sector, low traded firms, heavily traded firms. Small firms, large firms, domestic-owned firms, foreign owned firms, winner firms and loser firms. For all samples and subsamples, abnormal returns (for IAS adopters and non adopters) are analysed using the traditional market model but also using an average return model and a raw return model. The observed market reactions are then compared with those anticipated (or claimed by supporters of IASs adoption in the literature). The main findings are that IASs adoption does increase the information content of financial statements (as observed in abnormal returns) but that reaction occurs mainly prior to accounts release. An exception to this general effect is large firms where IAS adoption does not have an observable effect on abnormal returns around announcement date. The research also provides evidence that IASs adoption has little influence on Jordanian domestic-owned firms' share price reactions but a considerable effect of foreign-owned firms' share prices.
