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Who Benefits from the Adoption of IFRS?

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  • Shin'ya Okuda

    (Distribution and Communication Sciences, Osaka Gakuin University, Japan)

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    Abstract

    The research objective of this paper is to investigate when the adoption of International Financial Reporting Standards (IFRS) is beneficial to capital market participants. In particular, I specify the conditions in which IFRS is superior to domestic accounting standards from cost of capital and disclosure viewpoint. This paper presents a competitive equilibrium model to demonstrate who would prefer IFRS to domestic accountingstandards, and when. It shows that in certain conditions, there is a conflict between firms' managers and investors, with regard to the adoption of IFRS. It also demonstrates that although the quality of accounting standards is an important condition, it does not necessitate IFRS preference by managers and investors. This sheds light on the fact that the ratio of foreign investors affects the decision.

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    File URL: http://www.rieb.kobe-u.ac.jp/tjar/article/vol1/pdf/4.Okuda.pdf
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    Bibliographic Info

    Article provided by Research Institute for Economics & Business Administration, Kobe University in its journal The Japanese Accounting Review.

    Volume (Year): 1 (2011)
    Issue (Month): (December)
    Pages: 61-69

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    Handle: RePEc:kob:tjrevi:dec2011:v:1:p:61-69

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    Keywords: International Financial Reporting Standards; Disclosure; Cost of Capital; Competitive Equilibrium;

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    1. Vicentiu M. Covrig & Mark L. Defond & Mingyi Hung, 2007. "Home Bias, Foreign Mutual Fund Holdings, and the Voluntary Adoption of International Accounting Standards," Journal of Accounting Research, Wiley Blackwell, Wiley Blackwell, vol. 45(1), pages 41-70, 03.
    2. Mark T. Bradshaw & Brian J. Bushee & Gregory S. Miller, 2004. "Accounting Choice, Home Bias, and U.S. Investment in Non-U.S. Firms," Journal of Accounting Research, Wiley Blackwell, Wiley Blackwell, vol. 42(5), pages 795-841, December.
    3. Mary E. Barth & Wayne R. Landsman & Mark H. Lang, 2008. "International Accounting Standards and Accounting Quality," Journal of Accounting Research, Wiley Blackwell, Wiley Blackwell, vol. 46(3), pages 467-498, 06.
    4. Shyam Sunder, 2011. "IFRS monopoly: the Pied Piper of financial reporting," Accounting and Business Research, Taylor & Francis Journals, Taylor & Francis Journals, vol. 41(3), pages 291-306, August.
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