Consequences of Accounting Harmonization:IFRS Adoption and Cross-Border Contagion.

International Financial Reporting Standards;Economics;Business;Business Administration

De George, Emmanuel T.Nagar, Venkatesh K. ;

University of Michigan

关键词: International Financial Reporting Standards;    Economics;    Business;    Business Administration;   

Others  :  https://deepblue.lib.umich.edu/bitstream/handle/2027.42/99888/edgeorge_1.pdf?sequence=1&isAllowed=y

瑞士|英语

来源: The Illinois Digital Environment for Access to Learning and Scholarship

【 摘 要 】

This study examines the impact of accounting harmonization on cross-border capital market contagion.Employing a sample of approximately 14,000 firms across 35 countries for the period 2001-2010, I document an increase in cross-border contagion amongst IFRS adopting markets.After controlling for common macro-level exposures and bilateral trade linkages, I find significant clustering in the incidence of extreme negative market returns across IFRS adopting countries, relative to the clustering observed across non-adopting countries.Providing further insight, I show that liquidity shocks—captured by the volatility of liquidity—originating in foreign markets have a significantly greater impact on the variability of local market liquidity when both the foreign and local markets follow IFRS.Cross-sectional analysis of IFRS adopters shows my documented contagion results are more pronounced within countries that experienced the greatest increase in foreign portfolio investment around the adoption of IFRS.Conversely, the observed impact of foreign liquidity shocks on local markets is attenuated in countries that experienced the greatest increase in reporting transparency post-IFRS adoption. These results are robust to several sensitivity tests and alternative specifications.Taken together, the evidence presented in this study suggests that equity market integration associated with IFRS adoption also imposes a significant market cost by opening local markets to foreign idiosyncratic shocks.