Abstract

The purpose of this study is to examine the reaction of capital market by comparing the early adoption corporations and the mandatory adoption corporations at the point of mandatory adoption of K-IFRS, and also figures out the sustainable of early adoption corporations and the effect of the mandatory corporations simultaneously. The result of empirical analysis is as follows. First, hypothesis 1 verified if the early adoption corporations had positive reaction in the capital market before the mandatory adoption period of K-IFRS in terms of earnings response coefficient and value relevance with earnings. As a result, earnings response coefficient and the value relevance between the early adoption corporations and the mandatory adoption corporations had statistically significant differences which support hypothesis 1. It means that the early adoption corporations had more positive than those without adoption in the capital market. Second, hypothesis 2 verified the response of capital market to the early adoption corporations after the mandatory adoption. As a result, there was no significant difference between the early and mandatory adoption corporations which does not support hypothesis 2. It means there is no difference in the response of capital market after the mandatory adoption. It seems because the capital market evaluated the mandatory adoption positively which resulted in set-off of the early adoption effect. The limits of this study are as follow. Namely, it is difficult to generalize the positive response of the capital market by comparing the early adoption corporations and mandatory adoption corporations as less than 2 years of mandatory adoption of K-IFRS.

Keywords

• early adoption of K－IFRS
• mandatory adoption of K－IFRS
• reaction of capital market

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