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| Author: | Knight, R. F. Affleck-Graves, J. F. |
| Title: | Further evidence on the market response to LIFO adoptions |
| Journal: | Journal of Business Finance and Accounting
1988 : SUMMER, VOL. 15:1, p.169-184 |
| Index terms: | STOCK EXCHANGES LIFO METHOD RETURN ON INVESTMENT |
| Language: | eng |
| Abstract: | A study of the market response to LIFO adoptions in the context of the Johannesburg Stock Exchange is reported. Employing the usual market model a negative market response is observed similar to recent studies based on United States data. This negative response is attributed to an adverse signal effect, which is controlled by designing a control group of firms which adopted LIFO for tax purposes but not for external reporting. The control group exhibited relatively positive abnormal returns consistent with the signalling hypothesis. It is concluded that further empirical work on the reaction of markets to management activity and theoretical developments in this area may explain or disprove the LIFO paradox. |
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