The Impact of Mandatory IFRS Adoption on Foreign Mutual Fund Ownership: The Role of Comparability

Posted: 16 May 2011

See all articles by Mark L. DeFond

Mark L. DeFond

University of Southern California - Leventhal School of Accounting

Xuesong Hu

University of Oregon - Department of Accounting

Mingyi Hung

Hong Kong University of Science & Technology (HKUST)

Siqi Li

Santa Clara University - Leavey School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: May, 15 2011

Abstract

Proponents of IFRS argue that mandating a uniform set of accounting standards improves financial statement comparability that in turn attracts greater cross-border investment. We test this assertion by examining changes in foreign mutual fund investment in firms following mandatory IFRS adoption in the European Union in 2005. We measure improved comparability as a credible increase in uniformity, defined as a large increase in the number of industry peers using the same accounting standards in countries with credible implementation. Consistent with this assertion, we find that foreign mutual fund ownership increases when mandatory IFRS adoption leads to improved comparability.

Keywords: Comparability, Uniformity, IFRS, Mutual Funds, Foreign Investment

JEL Classification: M40, M41, G15, G18, G23

Suggested Citation

DeFond, Mark and Hu, Xuesong and Hung, Mingyi and Li, Siqi, The Impact of Mandatory IFRS Adoption on Foreign Mutual Fund Ownership: The Role of Comparability (May, 15 2011). Journal of Accounting & Economics (JAE), Vol. 51, No. 3, 2011. Available at SSRN: https://ssrn.com/abstract=1842849

Mark DeFond

University of Southern California - Leventhal School of Accounting ( email )

Accounting Building, Room 206
Los Angeles, CA 90089-0441
United States
213-740-5016 (Phone)
213-747-2815 (Fax)

Xuesong Hu

University of Oregon - Department of Accounting ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

Mingyi Hung

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Siqi Li (Contact Author)

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

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