Article2007

Cross-sectional variation in the economic consequences of international accounting harmonization: The case of mandatory IFRS adoption in the UK

Hans Bonde Christensen · Edward Lee · Martin Walker

231 citations0/0 files storedThe International Journal of Accounting

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Auditing, Earnings Management, Governance Corporate Finance and Governance Accounting Theory and Financial Reporting

Abstract

This study examines the economic consequences for UK firms of the European Union's decision to impose mandatory IFRS . We hypothesize that the impact varies across firms and is conditional on the perceived benefit. We estimate a counter-factual proxy for a UK firm's willingness to adopt IFRS from the prior GAAP choices of German firms. We show that this proxy predicts cross-sectional variations in both the short-run market reactions and the long-run changes in cost of equity that are associated with the decision. This implies that mandatory IFRS adoption does not benefit all firms in a uniform way but results in relative winners and losers.

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References

1985The Structure of Corporate Ownership: Causes and Consequences 1997Industry costs of equity 1997Disclosure level and the cost of equity capital.1996Corporate Disclosure Policy and Analyst Behavior.2004Costs of Equity and Earnings Attributes 2000The Economic Consequences of Increased Disclosure 1999The Economic Consequences of Increased Disclosure 2001Toward an Implied Cost of Capital

Cited by

2012Adopting a Label: Heterogeneity in the Economic Consequences Around IAS/IFRS Adoptions 2013The continued survival of international differences under IFRS 2012Voluntary adoption of International Financial Reporting Standards by large unlisted companies in Portugal – Institutional logics and strategic responses 2009Do IFRS Reconciliations Convey Information? The Effect of Debt Contracting 2013Earnings quality and the adoption of IFRS‐based accounting standards 2016Accounting Comparability and Economic Outcomes of Mandatory IFRS Adoption

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