Capital Market Effects of the IFRS Adoption for Separate Financial Statements: Evidence from the Italian Stock Market

Using a sample of Italian firms, I nvestigate the value-relevance of separate financial statements as well as the effects of adopting IFRS. I find that separate financial statements provide investors with useful information, regardless of the accounting standard set used for their preparation. I also document significant differences in value‐relevance between Italian GAAP and IFRS, with IFRS being more informative than Italian GAAP. However,while results are robust for book value, they provide mixed evidence on net income. Overall, this study contradicts those who claim that separate financial statements serve taxation purposes only and provides evidence that adopting IFRS has increased the value ‐relevance of accounting data.