This research aimed to determine differences in asymmetric information and market capitalization before

and after adoption International Financial Reporting Standard (IFRS). In this research IAS (Standard

Accounting in Indonesia) 50 and IAS 55 which was implemented in 2010 is used as a proxy for adoption

IFRS. This research using quantitative methods with paired sample test. Results of hypothesis testing on

16 banks showed a significant difference of asymmetric information and market capitalization before and

after adoption IFRS

Mulyaningsih, Ayu

Setianingsih, Ely Puji

Gunadarma University Repository

The 3rd Uzbekistan-Indonesia International Joint Conference onEconomic Development and Nation Character Building to Meet the Global Economic ChallengesISBN: 978-602-9438-24-6 176Analysis Comparative of Asymmetric Information andMarket Capitalization of Banking Before and After AdoptionIFRSAyu Mulyaningsih Ely Puji SetianingsihGunadarma University Gunadarma Universityayuamul@yahoo.com selypuji@yahoo.co.idSartikaGunadarma Universitysartika31@yahoo.comAbstractThis research aimed to determine differences in asymmetric information and market capitalization be-fore and after adoption International Financial Reporting Standard (IFRS). In this research IAS (StandardAccounting in Indonesia) 50 and IAS 55 which was implemented in 2010 is used as a proxy for adoptionIFRS. This research using quantitative methods with paired sample test. Results of hypothesis testing on16 banks showed a significant difference of asymmetric information and market capitalization before andafter adoption IFRS.Keywords :International Financial Reporting Standard (IFRS), asymmetric information, market capitaliza-tion1 IntroductionGlobalization has directed to the implementation ofone based international accounting standard, thatis IFRS. The development of international tradeand multinational companies in Indonesia are back-ground for the implementation of accounting stan-dard of globally applicable. The implementation ofIFRS is an absolute because there are many bene-fits from it, such as the financial statements moreuseful, can be compared, and not mislead the user.IFRS as a guide in the uniformity of financial report-ing has been doing in various parts of the world,such as in European Union, The United States ofAmerica, Australia and Asia.IFRS as the generally accepted accounting stan-dard also has several of benefits in increasing thequality of financial reporting. According to GlobalGAAP in [2], there are some of the benefits of theimplementation of IFRS such as the capital mar-ket being global, investors can make better invest-ment decisions, companies can improve decision-making strategies, and has best idea result of thehigh-quality the global standard. These benefits en-courage various countries to implement IFRS in itsfinancial reporting.IFRS is used to increase the transparency of acompany with disclosing accurate and relevant in-formation. Then the Implementation of IFRS inbanking sector particularly expected to increasetransparency, so that the users of financial state-ment can take the right economic decisions. Be-cause there is high demand for information to at-tract investor’s interest and influence the existenceof a country’s capital market.Bank has function to running the intermedia-tion function of customers’ funds, so that bank hasplayed the vital role in the coverage of domesticand international markets. Banks require clear ac-counting standards for in the interest of customersand investors. This research aimed to determinedifferences in asymmetric information and marketcapitalization before and after adoption IFRS. Thisresearch is expected to assist in the use and evalua-tion for consideration for user financial statements.Similar research on the differences of asymmetricinformation before and after adoption IFRS by [7]has found that there was no significant differenceof the bid-ask spread before and after the imple-mentation of IFRS. While [1] examined the perfor-mance analysis of banks that adopt IFRS based onstock price, earnings per share and market capital-ization. The result, showed that the performance ofbanks relatively better after the implementation ofIFRS.Based on the background above, the researcheris interested in reviewing whether there are differ-ences in asymmetric information and market cap-The 3rd Uzbekistan-Indonesia International Joint Conference onEconomic Development and Nation Character Building to Meet the Global Economic ChallengesISBN: 978-602-9438-24-6 177italization after adoption IFRS. The differences inthis research with previous research are the imple-mentation of IFRS in this research is more focusedon the implementation of IAS 50 (revised 2006)Financial Instruments: Presentation and Measure-ment which is adoption of IFRS 32, and IAS 55 (re-vised 2006) Financial Instruments: Recognize andMeasurement is adoption of IFRS 39.2 Method of ResearchThe object in this research is listed bank in Indone-sia Stock Exchange (IDX). The sample selected withpurposive judgment sampling, such as: (1) the con-ventional banks of government and private of for-eign exchange, (2) The banks who have completedannual report for the period 2007 to 2012, (3) Bankhas data which needed in this research. Based onthese criteria, so amount of samples to be objectsof research are 16 banks. The following are sampleselection table:Table 1: Sampling SelectionSampling Criteria TotalAmount of banks in IDX 33Reduction of The Sample :Amount of private banks Non-Foreign -9Banks which has no complete annualreport 2007-2012-2Banks has no which needed this research -6Total Sample in This Research 16The data which used in this research are sec-ondary data sourced from annual report the eachbank obtained from the official website of IDX(www.idx.co.id) and historical stock prices inwww.finance.yahoo.com. While the data analy-sis methods which used in this research is pairedtest sample T-test. This test is used to determinewhether there is a significant difference of the bid-ask spread and market capitalization before and af-ter adoption IFRS.3 Result and DiscussionAdoption IFRS in this research is measured by IAS50 (revised 2006) and IAS 55 (revised 2006) whichis adoption from IFRS 32 and IFRS 39 (revised2005). The IAS 50 and IAS 55 began applied in2010. Before doing the paired sample test, re-searcher calculate the asymmetric information andmarket capitalization before adoption IFRS (2007-2009) and after adoption IFRS (2010-2012). Ac-cording Pyndick in [3] asymmetric information isdefined as one side of negotiation process has bet-ter information than the other. The asymmetricinformation in this research using bid-ask spreadmethod, while the market capitalization is calcu-lated by Natural Logarithm (Ln) on each object ofthe research. Bid-ask spread is the difference be-tween the highest bid price (the price at whichinvestors are willing to pay a security of the is-suer) with the highest ask price (the highest priceat which the issuer is willing to sell the securitiesto investors) [6]. The formula for compute bid-askspread (Leuz, 2003) are as follows:spread =bid it− ask it(bid it+ ask it) 2(1)While the market capitalization is the fair valueof the company that measured by market value ofshares outstanding [8]. Here are the result of de-scriptive statistics to describe the data used in thisresearch are the average value, standard deviation,minimum value, and maximum value of the asym-metric information and market capitalization.Table 2: Result of Descriptive StatisticsN Minimun Maximum Mean Std. De-viationasymmetricbefore48 0,13 1,41 0,7578 0,33395asymmetricafter48 0,00 1,31 0,4922 0,29152marketcapitalizationbefore48 17,44 32,4 28,7851 2,86910marketcapitalizationafter48 26,32 43,46 30,5190 3,34592Valid N(listwise)48Source: Data processed using SPSS 15Comparison of average between asymmetric in-formation before and after adoption IFRS is clear,from 0,7578 to 0,4922. This indicates that there isa decrease of asymmetric information after adop-tion IFRS. In other words, adoption IFRS can re-duce the asymmetric information. The smallerasymmetric information, the financial statement ofa company is better [7].Comparison of average between market capital-ization before and after adoption IFRS is clear, from28,7851 to 30,5190. This indicates that there isan increase of market capitalization after adoptionIFRS. The increase of market capitalization showsthat stock price of a company is high. The higherstock price shows the higher company’s value.The 3rd Uzbekistan-Indonesia International Joint Conference onEconomic Development and Nation Character Building to Meet the Global Economic ChallengesISBN: 978-602-9438-24-6 1784 Hypothesis Test of Asymmet-ric Information Before AfterAdption IFRSThis research using paired sample test for testingthe hypothesis, which is the sample is intercon-nected between one to another sample. Here arethe results of correlation testing of asymmetric in-formation before and after adoption IFRS:Table 3: Paired Sample Correlations of AsymmetricInformasionPaired Samples CorrelationsN Correlation Sig.Pair Asymmetric(before)48 -,158 ,2481 & Asymmetric(after)Source: Data processed using SPSS 15From the result of paired sample correlationabove, the correlation of asymmetric informationbefore and after adoption IFRS is -0,158 and thesignificant value is 0,284 which is no significant be-cause the value is greater than 0,05. The negativeand no significant correlation in this research showsif the company adopts the international accountingstandard, the lower of asymmetric information butno significant.Next is a paired sample test. In this paired sampletest, if the significant value greater than 0,05, so H0is accepted. If the significant value is less than 0,05,so H0 is rejected. This research examined whetherasymmetric information of banking has a differentbetween before and after adoption IFRS. The testresult can be seen in the table below:Table 4: Paired Sample Test od Asymmetric Infor-mationSource: Data processed using SPSS 15From the result of analysis paired sample test ofasymmetric information, the first hypothesis usedin this research is:• H0 : There is no difference of asymmetric in-formation before and after adoption IFRS inbanking sector• Ha : There is a difference of asymmetric infor-mation before and after adoption IFRS in bank-ing sectorBased on the table above, the value significanceof average asymmetric information before and af-ter adoption IFRS is 0,000. This suggests that thesignificance value is less than 0.05, it means H0rejected and Ha accepted. In other words, thereare differences in the asymmetric information be-fore and after adoption IFRS. This results contrastto studies conducted by [7], who found no signif-icant difference from asymmetric information be-fore and after the application of IFRS.This research shows that there are differencesin the asymmetric information before and afteradoption IFRS. This means with implementationof adoption IFRS the asymmetric information willbe decrease, this is because financial reporting hashigher quality. The greater asymmetric informationwill increase the chances of manipulating financialstatements by management (Jensen and Meckling,1976 in Lafond dan Watts, 2006).5 Market Capitalization Hy-pothesis Testing Before andAfter Adoption IFRSCorrelation value of market capitalization in this re-search as follows:Table 5: Paired Samples Correlations of MarketCapitalizationPaired Samples CorrelationsN Correlation Sig.Pair Capitalization(before)48 ,335 ,0201 Capitalization(before)Source: Data processed using SPSS 15From the results of paired samples correlationsabove, the correlation of market capitalization be-fore and after adoption IFRS is 0.335 and signif-icance value is 0.020 which means significant be-cause the value is less than 0.05. Correlation is pos-itive and significant in this research suggests thatif a company adopts international accounting stan-dards, the higher the market capitalization.In paired samples test, this research examinedwhether differences in market capitalization hadbefore and after adoption IFRS.Table 6: Paired Samples Test of Market Capitaliza-tionSource: Data processed using SPSS 15From the analysis of paired samples test, the sec-ond hypothesis used in this research is:• H0 : There is no difference in market capital-ization before and after adoption IFRS in thebanking sector• Ha : There is a difference in market capital-ization before and after adoption IFRS in thebanking sectorThe 3rd Uzbekistan-Indonesia International Joint Conference onEconomic Development and Nation Character Building to Meet the Global Economic ChallengesISBN: 978-602-9438-24-6 179Based on the table above, the market capitalizationvalue of significance before and after adoption IFRSis equal to 0.002. This suggests that the signifi-cance value is less than 0.05, which means that H0is rejected and Ha accepted. In other words thereis a difference to the market capitalization beforeand after adoption IFRS. This indicates higher mar-ket capitalization of the company means the stockprice and the company’s value increase. The resultsof this research same with research of Anggrayni,et al (2011) that results the performance of thebanks that have adopted IFRS views by earnings pershare stock price and market capitalization are bet-ter than the banks that have not yet adopted IFRS.6 ConclusionBased on the table above, the market capitalizationvalue of significance before and after adoption IFRSis equal to 0.002. This suggests that the significancevalue is less than 0.05, which means that H0 is re-jected and Ha accepted. In other words there is adifference to the market capitalization before andafter adoption IFRS. This indicates higher marketcapitalization of the company means the stock priceand the company’s value increase. The results ofthis research same with research of [1] that resultsthe performance of the banks that have adoptedIFRS views by earnings per share stock price andmarket capitalization are better than the banks thathave not yet adopted IFRS.Beside that, after applied adoption IFRS, mar-ket capitalization of research object tends to in-crease significantly. This is because the implemen-tations of adoption IFRS make financial reportingbecome more transparent and have high account-ability. That gives the impact company’s stock pricewill increase and able to attract foreign investorsand creditors, so it will increase the company’s mar-ket capitalization.7 SuggestionTo better illustrate how the impact of the adop-tion of IFRS on companies in Indonesia, author sug-gested to further research examining all existing in-dustrial sectors in Indonesia Stock Exchange. Inaddition, adoption IFRS not only proxy with IAS50 and 55 but proxy with the other IAS has beenadopted in Indonesia.References[1] Wulandari P. R. Handayani S. W. dan Os-wari Teddy. Anggrayni, D. D. P. Analisis kin-erja perbankan yang mengadopsi standar pela-poran internasional (ifrs) berdasarkan hargasaham, laba per saham dan kapitalisasi pasar.Proceeding PESAT (Psikologi, Ekonomi, Sastra,Arsitektur & Sipil, 4, 2011.[2] dan Gary K. Meek. Choi, Frederick D.S. Inter-national Accounting (Akuntansi Internasional).Salemba Empat, Jakarta., 2005.[3] dan Fitriany. Haniati, Sri. Pengaruh kon-servatisme terhadap asimetri informasi den-gan menggunakan beberapa model penguku-ran konservatisme. Simposium Nasional Akun-tansi XIII Purwoketo, 2010.[4] Ryan. Lafond and R.L. Watts. The Informa-tion Role of Conservative Financial Statements.http://papers.ssrn.com, 2006.[5] C. Leuz. Ias versus u.s. gaap: Asymmet-ric information-based evidence from germany’snew market. Journal of Accounting Research,41(3):445–472, 2003.[6] C. Widi. Pratiwi. Implikasi Adopsi IFRS ter-hadap Kinerja dan Informasi Asimetris MelaluiTata Kelola Perbankan yang Baik di Bursa EfekIndonesia. Universitas Gunadarma, Jakarta,2013.[7] dan Rita Desniwati Pratiwi, C. Widi. KomparasiInformasi Asimetrik Sebelum dan Sesudah Pener-apan IFRS pada Emiten dan Investor di Indone-sia. 2012.[8] Sugara Anton dan Saputra Adhitya Rusmala,Handayani S. W. Informasi Asimetri PelaporanKeuangan Perusahaan-Perusahaan yang Terda-pat di BEI. 2009.

Analysis Comparative of Asymmetric Information and Market Capitalization of Banking Before and After Adoption IFRS

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