22 Pages Posted: 11 Jan 2010
Date Written: January, 10 2010
We study the economic consequence of IFRS adoption on cost of capital. We develop a model in which asset liquidity and IFRS adoption play a crucial role in determining the cost of capital. Our model and analysis predict that firms that adopt IFRS will have lower cost of capital than those do not. We then empirically test these predictions. The results of our cross-industry regression highly support our predictions.
Keywords: Economic Consequence, IFRS, cost of capital, asset liquidity, cross section
JEL Classification: M44
Suggested Citation: Suggested Citation