The impact of IAS/IFRS adoption on Italian IPOs.

This study examines the impact of IFRS adoption on IPO underpricing; the latter is, as known, the positive spread between the first day of trading closing price and the offer price of a newly issued share. The phenomenon of underpricing is usually associated with information asymmetry among the actors involved in the process of listing. Some scholars suppose that IPO firms’ use of IFRS rather than domestic GAAP affect IPO underpricing through two mechanisms: (1) the quality, and (2) the comparability of financial reports. Our study is the first research that studies the impact of IAS/IFRS on the underpricing of IPOs in the Italian stock market. We find that IFRS adoption is not associated with a decrease in IPO underpricing and the only factor that is associated with this phenomenon is the trend of the financial market. Referring to the Italian stock market, our results suggest that IFRS adoption does not reduce information asymmetries among investors, probably due to the lax of enforcement which seems characterize the Italian environment.