Who Benefits from the Adoption of IFRS?

Abstract:     
The research objective of this paper is to investigate when the adoption of International Financial Reporting Standards (IFRS) is beneficial to capital market participants. In particular, I specify the conditions in which firms’ managers and investors prefer IFRS to domestic accounting standards. This paper presents a competitive equilibrium model to demonstrate who would prefer IFRS to domestic accounting standards, and when. It shows that in certain conditions, there is a conflict between firms’ managers and investors, with regard to the adoption of IFRS. It also demonstrates that although the quality of accounting standards is an important condition, it does not necessitate IFRS preference by managers and investors. This sheds light on the fact that the ratio of foreign investors affects the decision.

Number of Pages in PDF File: 18

Keywords: International Financial Reporting Standards, Disclosure, Cost of Capital, Competitive Equilibrium

JEL Classification: M41

working papers series