We empirically examine whether adopting a uniform set of accounting standards mitigates information frictions in financial markets and facilitates market integration. Using a difference‐in‐difference design, we find that after the mandatory adoption of IFRS local stock returns incorporate more global information and at a faster speed. The effect of IFRS adoption is stronger in countries where there are larger improvements in accounting comparability and for firms with a larger increase in foreign ownership. Overall, our results suggest that accounting standards harmonization facilitates financial market integration.

This article provides a comprehensive examination of the time-series behavior of relationship banks around and during borrower distress. Relationship and outside loans have similar interest rates during distress and even 2 years prior to distress. Relative to outside loans in distress, relationship loans in distress have lower maturity. The fraction of bank lending given by relationship banks reduces during borrower distress. Overall, borrowers in distress do not derive benefits from relationship banks. These findings are inconsistent with models that suggest banks have an implicit commitment to help their borrowers in distress due to reputation concerns.