Convergence of Accounting Standards and Financial Reporting Externality: Evidence from Mandatory IFRS Adoption

32 Pages Posted: 17 Sep 2018

See all articles by Ru Gao

Ru Gao

The University of Queensland

Baljit K. Sidhu

UNSW Australia Business School, School of Accounting

Date Written: September 2018

Abstract

Using mandatory adoption of International Financial Reporting Standards (IFRS) as a natural experiment, we examine whether reporting externalities can be magnified when financial disclosures are based on a common set of accounting standards. Specifically, we investigate and find that the changes in publicly available information of mandatory IFRS adopters (due to the convergence of accounting standards) can impact the investment efficiency of prior voluntary adopters. While we document positive externalities of mandatory IFRS, we also observe heterogeneity in these spillover effects at the firm and the country level, suggesting that externalities increase with improvements in the comparability of accounting information.

Keywords: Mandatory IFRS adoption, Investment efficiency, Externalities, Information comparability

Suggested Citation

Gao, Ru and Sidhu, Baljit K., Convergence of Accounting Standards and Financial Reporting Externality: Evidence from Mandatory IFRS Adoption (September 2018). Accounting & Finance, Vol. 58, Issue 3, pp. 817-848, 2018, Available at SSRN: https://ssrn.com/abstract=3244678 or http://dx.doi.org/10.1111/acfi.12236

Ru Gao (Contact Author)

The University of Queensland ( email )

Colin Clark, 39 Blair Dr,
St Lucia QLD
Brisbane, Queensland 4607
Australia
61 07 3443 4502 (Phone)

Baljit K. Sidhu

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

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