Network Effects in Countries’ Adoption of IFRS

50 Pages Posted: 18 Apr 2010 Last revised: 22 Aug 2013

See all articles by Karthik Ramanna

Karthik Ramanna

University of Oxford - Blavatnik School of Government

Ewa Sletten

The Ohio State University

Multiple version iconThere are 2 versions of this paper

Date Written: August 22, 2013


If the differences in accounting standards across countries reflect relatively stable institutional differences (e.g., auditing technology, the rule of law, etc.), why did several countries rapidly, albeit in a staggered manner, adopt IFRS over local standards in the 2003–2008 period? We test the hypothesis that perceived network benefits from the extant worldwide adoption of IFRS can explain part of countries’ shift away from local accounting standards. That is, as more jurisdictions with economic ties to a given country adopt IFRS, perceived benefits from lowering transactions costs to foreign financial-statement users increase and contribute significantly towards the country’s decision to adopt IFRS. We find that perceived network benefits increase the degree of IFRS harmonization among countries, and that smaller countries have a differentially higher response to these benefits. Further, economic ties with the European Union are a particularly important source of network effects. The results, robust to numerous alternative hypotheses and specifications, suggest IFRS adoption was self-reinforcing during the sample period, which, in turn, has implications for the consequences of IFRS adoption.

JEL Classification: M44, M41

Suggested Citation

Ramanna, Karthik and Sletten, Ewa, Network Effects in Countries’ Adoption of IFRS (August 22, 2013). Harvard Business School Accounting & Management Unit Working Paper No. 10-092, Available at SSRN: or

Karthik Ramanna (Contact Author)

University of Oxford - Blavatnik School of Government ( email )

Radcliffe Observatory Quarter
Oxford, Oxfordshire OX2 6GG
United Kingdom

Ewa Sletten

The Ohio State University ( email )

Fisher Hall
2100 Neil Avenue
Columbus, OH 43210
United States
6142922451 (Phone)

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