Proceedings of 11th International Business and Social Science Research Conference 8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2 Accounting Standard and Shareholders’ Value: Evidence from Market Reaction to IFRS Reconciliation Adjustment in Korea Jae-Seung Baek1 and Sang-Baek Kim We examine the effect of IFRS financial statement disclosure, which become mandatory for large Korean listed companies from 2011. We also analyze whether the earnings differential under KGAAP and IFRS (the old and new accounting conventions, respectively) has any meaningful relationship with the post-IFRS stock returns in order to determine if investors recognize the net profit change as a result of accounting standard change as unexpected returns. Additionally, we test the efficient market hypothesis with our dataset. Using the net income and industry data of 85 manufacturing companies and 10 financial companies that issue both IFRS and K-GAAP financial statements, we investigate factors to determine the earnings differential under the two standards and stock returns around announcement date. We then verify the relationship between CAR and the earnings differential using t-test. The results show that net income under IFRS increases compared to that under K-GAAP for the same period. Some evidence of value relevance is found in IFRS adjustments on earnings but not with IFRS adjustments in shareholders’ equity in the long-term view. These results suggest that great deal of IFRS reconciliations are anticipated by investors and firm value converges into fundamental factors. Keywords: Ifrs, K-Gaap, Accounting Standard, Shareholders’ Value, Valuation Impact, Event Study Jel Classification: G21, G24 1 Corresponding author; Division of International Finance, Hankuk University of Foreign Studies, Korea, Tel: 82-31-330-4936, Fax: +82-31-330-4074, E-mail: firstname.lastname@example.org Jae-Seung Baek , Division of International Finance, Hankuk University of Foreign Studies, South Korea Sang-Baek Kim, Division of International Finance, Hankuk University of Foreign Studies, South Korea.