Mandatory IFRS Adoption and Institutional Investment Decisions

The Accounting Review, 87:6, November 2012, Forthcoming

54 Pages Posted: 19 Mar 2009 Last revised: 1 Jun 2012

See all articles by Annita Florou

Annita Florou

Bocconi University

Peter F. Pope

Bocconi University; London School of Economics and Political Science

Date Written: April 20, 2012


We examine whether the mandatory introduction of International Financial Reporting Standards leads to an increase in institutional investor demand for equities. Using a large ownership database covering all types of institutional investors from around the world, we find that institutional holdings increase for mandatory IFRS adopters. Changes in holdings are concentrated around first-time annual reporting events. Second, we document that the positive IFRS effects on institutional holdings are concentrated among investors whose orientation and styles suggest they are most likely to benefit from higher quality financial statements, including active, value and growth investors. This result is consistent with the holdings changes being associated with the financial reporting regime change. Finally, we show that increased institutional holdings are concentrated in countries where enforcement and reporting incentives are strongest, and where the differences between local GAAP and IFRS are relatively high. Overall, our study helps shed new light on the channels by which IFRS information becomes impounded in market outcomes.

Keywords: Accounting regulation, IFRS, standard-setting, accounting quality, comparability, institutional investment decisions

JEL Classification: G11, K22, M41, M42

Suggested Citation

Florou, Annita and Pope, Peter F., Mandatory IFRS Adoption and Institutional Investment Decisions (April 20, 2012). The Accounting Review, 87:6, November 2012, Forthcoming, Available at SSRN: or

Annita Florou

Bocconi University ( email )

Via Roentgen 1
Milan, 20136


Peter F. Pope (Contact Author)

Bocconi University ( email )

Dept of Accounting
Milan, 20136

London School of Economics and Political Science ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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