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How do Individual Investors React to Global IFRS Adoption?

52 Pages Posted: 22 Aug 2009 Last revised: 2 Aug 2012

Ulf Brüggemann

Humboldt University of Berlin - School of Business and Economics

Holger Daske

University of Mannheim - Accounting and Taxation

Carsten Homburg

University of Cologne

Peter F. Pope

London School of Economics & Political Science (LSE)

Date Written: August 1, 2012

Abstract

We examine the impact of global IFRS adoption on cross-border equity investments by individual investors. Our proxy for cross-border equity investments is trading volume in the Open Market at Frankfurt Stock Exchange. The Open Market is a segment designed for German individual investors to trade a large selection of foreign stocks. Using a sample of 5,637 firms from 31 countries around the world, we find that stocks experience a significant increase in Open Market trading volume following mandatory adoption of IFRS. This effect is more pronounced for attention-grabbing stocks (e.g., stocks experiencing an increase in media coverage following IFRS adoption). Our results suggest that global IFRS adoption enhances cross-border equity investments by individual investors. However, this effect does not materialize equally across stocks due individual investors’ limited attention.

Keywords: Individual Investors, International Accounting, IFRS, Open Market, Cross-Border Investments

JEL Classification: G14, G38, K22, M41, M48

Suggested Citation

Brüggemann, Ulf and Daske, Holger and Homburg, Carsten and Pope, Peter F., How do Individual Investors React to Global IFRS Adoption? (August 1, 2012). AAA 2010 Financial Accounting and Reporting Section (FARS) Paper. Available at SSRN: https://ssrn.com/abstract=1458944 or http://dx.doi.org/10.2139/ssrn.1458944

Ulf Brüggemann (Contact Author)

Humboldt University of Berlin - School of Business and Economics ( email )

Spandauer Str. 1
Berlin, D-10099
Germany

Holger Daske

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

Carsten Homburg

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Peter F. Pope

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://www.lse.ac.uk/accounting/facultyAndStaff/profiles/Pope.aspx

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