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Why do countries adopt International Financial Reporting Standards?


  • Karthik Ramanna

    () (Harvard Business School, Accounting and Management Unit)

  • Ewa Sletten

    () (MIT Sloan School of Management)


In a sample of 102 non-European Union countries, we study variations in the decision to adopt International Financial Reporting Standards (IFRS). There is evidence that more powerful countries are less likely to adopt IFRS, consistent with more powerful countries being less willing to surrender standard-setting authority to an international body. There is also evidence that the likelihood of IFRS adoption at first increases and then decreases in the quality of countries' domestic governance institutions, consistent with IFRS being adopted when governments are capable of timely decision making and when the opportunity and switching cost of domestic standards are relatively low. We do not find evidence that levels of and expected changes in foreign trade and investment flows in a country affect its adoption decision: thus, we cannot confirm that IFRS lowers information costs in more globalized economies. Consistent with the presence of network effects in IFRS adoption, we find that a country is more likely to adopt IFRS if other countries in its geographical region are IFRS adopters.

Suggested Citation

  • Karthik Ramanna & Ewa Sletten, 2009. "Why do countries adopt International Financial Reporting Standards?," Harvard Business School Working Papers 09-102, Harvard Business School, revised Mar 2009.
  • Handle: RePEc:hbs:wpaper:09-102

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    Cited by:

    1. David Procházka, 2015. "Is a Full International Accounting Convergence Desirable?," Český finanční a účetní časopis, University of Economics, Prague, vol. 2015(3), pages 7-23.
    2. Kothari, S.P. & Ramanna, Karthik & Skinner, Douglas J., 2010. "Implications for GAAP from an analysis of positive research in accounting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 246-286, December.
    3. Dima, Bogdan & Dima(Cristea), Stefana Maria & Moldovan, Nicoleta & Pirtea, Marilen Gabriel, 2010. "National legislative systems and foreign standards and regulations: The case of International Financial Reporting Standards adoption," MPRA Paper 27172, University Library of Munich, Germany.
    4. Rahman, Asheq R., 2016. "Discussion on “IFRS Adoption, Extent of Disclosure, and Perceived Corruption: A Cross-country Study”," The International Journal of Accounting, Elsevier, vol. 51(3), pages 379-381.
    5. Devrimi Kaya & Maximilian Koch, 2015. "Countries' adoption of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) - early empirical evidence," Accounting and Business Research, Taylor & Francis Journals, vol. 45(1), pages 93-120, January.
    6. Alon, Anna & Dwyer, Peggy D., 2014. "Early Adoption of IFRS as a Strategic Response to Transnational and Local Influences," The International Journal of Accounting, Elsevier, vol. 49(3), pages 348-370.

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