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IFRS adoption in Europe and investment-cash flow sensitivity: outsider versus insider economies

Schleicher, Thomas, Tahoun, Ahmed and Walker, Martin (2010) IFRS adoption in Europe and investment-cash flow sensitivity: outsider versus insider economies. The International Journal of Accounting, 45 (2). pp. 143-168. ISSN 0020-7063

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Abstract

We examine the economic consequences of the mandatory adoption of IFRS in EU countries by showing which types of economies have the largest reduction in investment-cash flow sensitivity post-IFRS. We also examine whether the reduction in investment-cash flow sensitivity depends on firm size as well as economy type. We find that the investment-cash flow sensitivity of insider economies is higher than that of outsider economies pre-IFRS and that IFRS reduces the investment-cash flow sensitivity of insider economies more than that of outsider economies. Also, we find that small firms in insider economies have the highest sensitivity of investment to lagged cash flow pre-IFRS, and that they are no longer sensitive to lagged cash flow post-IFRS. Overall, our results suggest that IFRS adoption might have improved the functioning of capital markets in relation to small firms in insider economies.

Item Type: Article
Official URL: http://www.elsevier.com/wps/find/journaldescriptio...
Additional Information: © 2010 University of Illinois
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HG Finance
Journal of Economic Literature Classification System: G - Financial Economics > G1 - General Financial Markets
G - Financial Economics > G3 - Corporate Finance and Governance
K - Law and Economics > K2 - Regulation and Business Law > K22 - Corporation and Securities Law
M - Business Administration and Business Economics; Marketing; Accounting > M4 - Accounting and Auditing > M41 - Accounting
Sets: Departments > Accounting
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 20 Jun 2011 08:34
URL: http://eprints.lse.ac.uk/36837/

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