Online from: 1988
|Title:||Mandatory IFRS reporting around the world: early evidence on the economic consequences|
|Author(s):||Daske H, Hail L, Leuz C, Verdi R|
|Journal:||Journal of Accounting Research, Dec 2008, Volume: 46 Issue: 5 pp.1085-1142 (58 pages)|
|Keywords:||Accounting Standards, Cost Of Capital, International Accounting, Liquidity|
|Article type:||Research paper|
|Reference:||38AK398 (Permanent URL)|
Design/methodology/approach - Reviews relevant theoretical and empirical studies. Identifies 3,100 compliant firms adopting IFRS in 26 countries, using panel data for 2001-2005. Investigates capital market effects, cross-sectional variations, and the different effects in countries adopting IFRS at different times. Runs a difference-in-differences analysis and firm-level panel regressions, as well as cross-sectional analysis.
Findings - Finds that mandatory adoption of IFRS means firms achieve higher market liquidity than those that do not adopt. However, shows that cost of capital rises for adopters, and Tobin's Q remains unchanged. Notes the cost of capital effects are stronger for firms that had adopted voluntarily. Reveals that IFRS is implemented with heterogeneous effects, depending on pre-existing convergence strategy, governance, legal regimes and enforcement.
Research limitations/implications - Proposes research into the role of enforcement and governance regimes, and comparability and externality effects. Suggests longer-term analysis,
Originality/value - Presents preliminary analysis of the impact of IFRS on the world economy, challenging the research student.