Asset Liquidity, Cost of Capital and IFRS Adoption

22 Pages Posted: 11 Jan 2010  

George Lee

Simon Fraser University (SFU) - Beedie School of Business

Yasheng Chen

Simon Fraser University (SFU) - Beedie School of Business

Date Written: January, 10 2010

Abstract

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

Lee, George and Chen, Yasheng, Asset Liquidity, Cost of Capital and IFRS Adoption (January, 10 2010). Available at SSRN: https://ssrn.com/abstract=1534316 or http://dx.doi.org/10.2139/ssrn.1534316

George Lee (Contact Author)

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Yasheng Chen

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada
604-291-4485 (Phone)
604-291-4920 (Fax)

HOME PAGE: http://www.sfubusiness.ca

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