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Do IFRS Disclosure Requirements Reduce the Cost of Equity Capital? Evidence from European Firms

Author

Listed:
  • Ghouma Ghouma

    (Research Laboratory in Competitiveness, Commercial Decisions and Internationalization (CODECI), Faculty of Economics and Management of Sfax, University of Sfax, Aerodrome Road Km 4.5, Sfax 3018, Tunisia)

  • Hamdi Becha

    (Research Laboratory in Competitiveness, Commercial Decisions and Internationalization (CODECI), Faculty of Economics and Management of Sfax, University of Sfax, Aerodrome Road Km 4.5, Sfax 3018, Tunisia)

  • Maha Kalai

    (Research Laboratory in Competitiveness, Commercial Decisions and Internationalization (CODECI), Faculty of Economics and Management of Sfax, University of Sfax, Aerodrome Road Km 4.5, Sfax 3018, Tunisia)

  • Kamel Helali

    (Research Laboratory in Competitiveness, Commercial Decisions and Internationalization (CODECI), Faculty of Economics and Management of Sfax, University of Sfax, Aerodrome Road Km 4.5, Sfax 3018, Tunisia)

  • Myriam Ertz

    (Laboratory of Research on New Forms of Consumption (LaboNFC), Department of Economics and Administrative Sciences, University of Quebec at Chicoutimi, 555, Boulevard de l’Université, Saguenay, QC G7H 2B1, Canada)

Abstract

This study analyzes the impact of adopting International Financial Reporting Standards (IFRS) on the cost of equity capital for firms listed on STOXX Europe 600 using a sample of 9773 firm-year observations between 1994 and 2022. We estimate the cost of equity capital using the modified price–earnings–growth ratio model and employ the GMM system to investigate the effect of IFRS Standards on the cost of equity capital. Our results indicate that IFRS adoption reduces firms’ cost of equity capital. We performed various sensitivity analyses to ensure the reliability of our results. Overall, this study contributes to the extant literature on the cost of equity capital implications of IFRS adoption and provides valuable insights for investors, regulators, and policymakers.

Suggested Citation

  • Ghouma Ghouma & Hamdi Becha & Maha Kalai & Kamel Helali & Myriam Ertz, 2023. "Do IFRS Disclosure Requirements Reduce the Cost of Equity Capital? Evidence from European Firms," JRFM, MDPI, vol. 16(8), pages 1-19, August.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:8:p:374-:d:1217736
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    References listed on IDEAS

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