An Empirical Investigation of the UK Stock Market Response to the Implementation of SSAP 20 "Foreign Currency Translation"

George Iatridis, Nathan Joseph
2005 Investment Management & Financial Innovations  
This study presents an empirical investigation of the UK stock market response to the implementation of the UK Statement of Standard Accounting Practice (SSAP) No. 20 "Foreign Currency Translation" (issued in April 1983). Such an empirical investigation has not yet been undertaken for the UK. Our results show that the stock market generally appeared to have anticipated the implementation of SSAP 20. For the aggregate set of adopters, we found a positive stock market response in the official
more » ... in the official year of adoption, reflecting the appreciation of the income-stabilising effects of the standard. This paper also presents a cross-sectional analysis that tests for a relationship between the stock returns and the accounting measures of those firms that adopted SSAP 20. We found a significant relation between the stock returns and the related accounting measures in the actual adoption period of the aggregate set of adopters. This study generally focuses on the interpretation of the financial impacts of the various accounting choices of firms within their financial and economic environments.
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