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Why do firms rarely adopt IFRS voluntarily? Academics find significant benefits and the costs appear to be low

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  • Hans B. Christensen

    (University of Chicago)

Abstract

Kim and Shi (Rev Account Stud, doi: 10.1007/s11142-012-9190-y , this issue) document that voluntary IFRS adoption is associated with significant benefits and argue that the effect is causal—a conclusion that is similar to many published papers on IFRS adoption. Yet voluntary IFRS adopters constitute only a small percentage of the global population of firms, which implies that either practitioners behave irrationally or the benefits are incorrectly estimated by academics. In this discussion I argue that the error is on the part of academics, not practitioners, and that it is mainly due to the lack of exogenous variation in accounting standards. This conclusion is based on inconsistencies between the estimated benefits and costs of IFRS adoption, as well as the accounting standards choices of presumed rational managers. I also propose a contracting explanation for the capital market benefits around IFRS adoption in which managers behave rationally, but IFRS per se is not the cause.

Suggested Citation

  • Hans B. Christensen, 2012. "Why do firms rarely adopt IFRS voluntarily? Academics find significant benefits and the costs appear to be low," Review of Accounting Studies, Springer, vol. 17(3), pages 518-525, September.
    • Handle: RePEc:spr:reaccs:v:17:y:2012:i:3:d:10.1007_s11142-012-9202-y
    DOI: 10.1007/s11142-012-9202-y
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    References listed on IDEAS

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    Cited by:

    1. Stefano Cascino & Joachim Gassen, 2015. "What drives the comparability effect of mandatory IFRS adoption?," Review of Accounting Studies, Springer, vol. 20(1), pages 242-282, March.
    2. Jenny Xinjiao Guan & Emily Shafron & Kangtao Ye & Wenzi Zhuang, 2025. "Is accounting the English language of business? The role of language in IFRS adoption and information loss," Review of Accounting Studies, Springer, vol. 30(3), pages 2963-3020, September.

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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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