Impact of Tax- and IFRS-based financial disclosures on stock prices in Borsa Istanbul

Abstract

Purpose: This study investigates the impact of financial statements disclosed in accordance with the Turkish Tax Procedure Code (TPC) and International Financial Reporting Standards (IFRS) on stock prices at Borsa Istanbul. It aims to explore how each type of disclosure affects market reactions and the factors behind these responses. Design/methodology/approach: We analyze cumulative abnormal returns (CAR) associated with mandatory TPC and subsequent IFRS disclosures using standard event study methodology. We also apply logistic regression analysis to identify the key factors driving these reactions, with a particular focus on the time lag between disclosures, which leads to information asymmetry. Findings: The results indicate that mandatory TPC disclosures tend to elicit stronger negative market reactions, likely due to their tax-driven nature and limited informational value for investors. In contrast, IFRS disclosures help to reverse this negative reaction, making abnormal returns less negative and, in some cases, even positive. Furthermore, longer time lags between TPC and IFRS disclosures intensify negative market reactions, highlighting the role of information asymmetry. Originality/value: This study offers new insights into how the dual-reporting system in Türkiye influences investor behavior, an area that has not been explored in the literature. By examining both the timing and content of disclosures, the findings provide valuable implications for investors, firms and regulators to better understand how financial reporting impacts market dynamics.