The Impact of Mandatory IFRS Adoption on IPOs in Global Capital Markets

52 Pages Posted: 30 Jan 2014 Last revised: 17 Feb 2017

See all articles by Hyun A. Hong

Hyun A. Hong

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Mingyi Hung

Hong Kong University of Science & Technology (HKUST)

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business

Date Written: January 30, 2014

Abstract

This study examines the impact of mandatory IFRS adoption on IPO underpricing and the relative amount of IPO capital raised in foreign markets. Using a difference-in-differences design, we find a decrease in IPO underpricing and an increase in the relative proceeds from foreign markets following mandatory IFRS adoption. We also find that mandatory IFRS adoption has a greater impact on IPO underpricing and relative foreign proceeds for firms in countries with a larger number of accounting changes, and this relation is more pronounced among firms in countries with stronger implementation credibility. In addition, we find that the decrease in underpricing associated with mandatory IFRS adoption holds for both domestic IPOs and global IPOs, and this effect is more pronounced for global IPOs than for domestic IPOs. Overall, our study contributes to the literature by documenting the impact of changes in financial accounting standards on IPO underpricing and capital market globalization.

Keywords: initial public offerings; International Financial Reporting Standards; underpricing; financial globalization

JEL Classification: G15, M40, M41

Suggested Citation

Hong, Hyun A. and Hung, Mingyi and Lobo, Gerald J., The Impact of Mandatory IFRS Adoption on IPOs in Global Capital Markets (January 30, 2014). The Accounting Review, Volume 89, Issue 4, 2014, Available at SSRN: https://ssrn.com/abstract=2388045

Hyun A. Hong

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States

Mingyi Hung (Contact Author)

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

Clearwater Bay
Kowloon, 999999
Hong Kong

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States
713-743-4838 (Phone)
713-743-4828 (Fax)

HOME PAGE: http://www.bauer.uh.edu/acct/acctprofile.asp?search=Gerald%20Lobo

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