Empirical study of valuation relative of companies using the French accounting standards after the adoption of IFRS standards

We investigate whether the mandatory adoption of IFRS by the European Union, in 2005, affects the implementation of the comparable company method when valuing firms that still apply local GAAP. The advent of IFRS severely reduces the pool of peers with local GAAP. Our analysis of 94 targets of takeover bids announced between 1999 and 2016 shows that the number of peers is reduced after 2005, but their selection is based on more criteria. Overall, economic comparability of peers increases but accounting comparability decreases. Practitioners compensate for this impaired accounting comparability by shifting to multiples that are less sensitive to accounting differences, and by reducing the weight of values computed with the comparable company method in the final offer price. Overall, our paper contributes to the scant literature on the economic consequences of IFRS adoption for non-adopters.