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Mandatory IFRS adoption and institutional investment decisions

Florou, Annita and Pope, Peter (2012) Mandatory IFRS adoption and institutional investment decisions. Accounting Review, 87 (6). pp. 1993-2025. ISSN 0001-4826

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Identification Number: 10.2308/accr-50225

Abstract

We examine whether the mandatory introduction of International Financial Reporting Standards leads to an increase in institutional investor demand for equities. Using a large ownership database covering all types of institutional investors from around the world, we find that institutional holdings increase for mandatory IFRS adopters. Changes in holdings are concentrated around first-time annual reporting events. Second, we document that the positive IFRS effects on institutional holdings are concentrated among investors whose orientation and styles suggest they are most likely to benefit from higher quality financial statements, including active, value, and growth investors. These results are consistent with holdings changes being associated with the financial reporting regime change. Finally, we show that increased institutional holdings are concentrated in countries in which enforcement and reporting incentives are strongest, and where the differences between local GAAP and IFRS are relatively high. Overall, our study helps shed new light on the channels by which IFRS information becomes impounded in market outcomes.

Item Type: Article
Official URL: http://aaajournals.org/loi/accr
Additional Information: © 2012 American Accounting Association
Divisions: Accounting
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
JEL classification: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
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
M - Business Administration and Business Economics; Marketing; Accounting > M4 - Accounting and Auditing > M42 - Auditing
Sets: Departments > Accounting
Date Deposited: 28 Apr 2014 12:54
Last Modified: 20 May 2019 01:22
URI: http://eprints.lse.ac.uk/id/eprint/51852

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