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The impact of mandatory IFRS adoption on foreign mutual fund ownership: The role of comparability

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  • DeFond, Mark
  • Hu, Xuesong
  • Hung, Mingyi
  • Li, Siqi
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    Abstract

    Proponents of IFRS argue that mandating a uniform set of accounting standards improves financial statement comparability that in turn attracts greater cross-border investment. We test this assertion by examining changes in foreign mutual fund investment in firms following mandatory IFRS adoption in the European Union in 2005. We measure improved comparability as a credible increase in uniformity, defined as a large increase in the number of industry peers using the same accounting standards in countries with credible implementation. Consistent with this assertion, we find that foreign mutual fund ownership increases when mandatory IFRS adoption leads to improved comparability.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Accounting and Economics.

    Volume (Year): 51 (2011)
    Issue (Month): 3 (April)
    Pages: 240-258

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    Handle: RePEc:eee:jaecon:v:51:y:2011:i:3:p:240-258

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    Web page: http://www.elsevier.com/locate/jae

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    Keywords: Comparability Uniformity International Financial Reporting Standards Mutual funds Foreign investment;

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    Cited by:
    1. Lambert Jerman, 2013. "La Juste Valeur : Une Comptabilite Actuarielle Pour Les Marches ... Ou Les Comptables ?," Post-Print hal-00991877, HAL.
    2. Hamberg, Mattias & Mavruk, Taylan & Sjögren, Stefan, 2013. "Investment allocation decisions, home bias and the mandatory IFRS adoption," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 107-130.
    3. Stiebale, Joel, 2012. "Cross-Border M&A and Innovative Activity: Firm-Level Evidence," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62027, Verein für Socialpolitik / German Economic Association.
    4. Pierre Bonetti & Antonio Parbonetti & Michel Magnan, 2013. "The Influence of Country- and Firm-Level Governance on Financial Reporting Quality: Revisiting the Evidence," CIRANO Working Papers 2013s-03, CIRANO.
    5. Christensen, Hans B. & Hail, Luzi & Leuz, Christian, 2013. "Mandatory IFRS reporting and changes in enforcement," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 147-177.
    6. Joel Stiebale, 2014. "Cross-Border M&As and Innovative Activity of Acquiring and Target Firms," Discussion Papers 2014-06, University of Nottingham, GEP.
    7. Paul André & Peter Walton & Dan Yang, 2012. "Voluntary adoption of IFRS: A study of determinants for UK unlisted firms," Post-Print hal-00935013, HAL.

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