52 Pages Posted: 22 Aug 2009 Last revised: 2 Aug 2012
Date Written: August 1, 2012
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: 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
By Ray Ball