Adopting the IFRS and its impact on reducing information asymmetry in the Chilean capital market

摘要

The purpose of this paper is to measure the effects of adopting International Financial Reporting Standards (IFRS) on market transparency and in information asymmetry reduction. The spread (bid-ask) on intra-day shares from the Santiago Stock Exchange for 2007-2012 is used as a proxy for information asymmetry. The paper analyzes the relation between the spread and the quality of information provided to the capital markets, which are measured by two information disclosure indices (DIS and Botosan), and the relation between the spread and IFRS adoption, also using a group of control variables. We conclude that the disclosure of financial information, which is considered to be a significant element of the quality of corporate governance, and the adoption of IFRS have a negative relation with the spread. This paper contributes to the literature by analyzing this phenomenon in a market characterized by a high concentration of ownership in a country whose legislation protects minority shareholder rights and by using intra-day data to capture spread behavior.