The Reaction of the Greek Stock Market to IFRS 16

Abstract

In this paper, we examine if the implementation of the IFRS 16 about leases had an impact on the stocks traded on Athens Exchange. We use a sample of 79 listed companies to examine whether the prices and the risk of their stocks were affected by the new accounting standard. In doing so, we conduct an event study to estimate abnormal return and volatility of stocks around the publication dates of the sample’s financial statements for year 2019. Similar estimates are prepared for year 2018, which is used as the control year. Afterwards, we compute three representative financial ratios concerning the companies’ profitability, leverage and liquidity. Finally, we check the validity of three assumptions about the impact of IFRS 16 on stock performance and volatility; 1) higher profitability results in higher stock returns and lower volatility, 2) higher leverage ratios, leads to lower stock returns and increased risk, and 3) decreased liquidity results in lower stock returns and increased risk. The empirical findings do not verify these assumptions.