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Adoption of international financial reporting standards and the cost of adverse selection

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  • Dean Katselas
  • Sviatoslav Rosov

Abstract

This paper tests whether the adoption of International Financial Reporting Standards (IFRS) reduces the cost of adverse selection. We find that adverse selection costs fall only for firms that adopt IFRS before the mandated date. We also find that firms in countries with well‐developed local reporting standards do not benefit from improved transparency as a result of IFRS adoption. We also find that IFRS adoption relies on strong local enforcement to have any significant impact on transparency. We conclude that IFRS adoption may be less effective if local standards are well‐developed, or are poorly enforced.

Suggested Citation

  • Dean Katselas & Sviatoslav Rosov, 2018. "Adoption of international financial reporting standards and the cost of adverse selection," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(4), pages 1141-1168, December.
    • Handle: RePEc:bla:acctfi:v:58:y:2018:i:4:p:1141-1168
    DOI: 10.1111/acfi.12251
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    References listed on IDEAS

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    1. Holger Daske & Luzi Hail & Christian Leuz & Rodrigo Verdi, 2008. "Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences," Journal of Accounting Research, Wiley Blackwell, vol. 46(5), pages 1085-1142, December.
    2. Beuselinck, C.A.C. & Joos, P.P.M. & Khurana, I.K. & van der Meulen, S., 2010. "Mandatory IFRS Reporting and Stock Price Informativeness," Other publications TiSEM ef72d273-639c-41d8-9c5c-5, Tilburg University, School of Economics and Management.
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    Cited by:

    1. Cynthia W. Cai & Martina K. Linnenluecke & Mauricio Marrone & Abhay K. Singh, 2019. "Machine Learning and Expert Judgement: Analyzing Emerging Topics in Accounting and Finance Research in the Asia–Pacific," Abacus, Accounting Foundation, University of Sydney, vol. 55(4), pages 709-733, December.
    2. Sameh Ammar & Ghassan H. Mardini, 2021. "Enterprise resource planning enabling segmental information reporting practices of UK‐FTSE 100," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 1205-1237, March.

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