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Journal of Accounting and Economics Vol. 51 No. 3 2011

The impact of mandatory IFRS adoption on foreign mutual fund ownership: The role of comparability

Mark L. DeFond1,2; Xuesong Hu3; Mingyi Hung2,1; Siqi Li4

1 University of Southern California · 2 California Southern University · 3 University of Oregon · 4 Santa Clara University

Abstract

Proponents of IFRS argue that mandating a uniform set of accounting standards improves financial statement comparability that in turn attracts greater cross-border investment. We test this assertion by examining changes in foreign mutual fund investment in firms following mandatory IFRS adoption in the European Union in 2005. We measure improved comparability as a credible increase in uniformity, defined as a large increase in the number of industry peers using the same accounting standards in countries with credible implementation. Consistent with this assertion, we find that foreign mutual fund ownership increases when mandatory IFRS adoption leads to improved comparability.

DOI
10.1016/j.jacceco.2011.02.001
Volume
51
Issue
3
Pages
240-258
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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