Firms’ Voluntary IFRS Adoption and Network Effects: An Empirical Study of Japan

39 Pages Posted: 22 Sep 2018 Last revised: 13 Feb 2020

See all articles by Eriko Kameoka

Eriko Kameoka

Tohoku University; Tohoku University - Economics & Management

Masashi Okumura

Waseda University - Graduate School of Commerce

Su Yan

Waseda University

Date Written: February 12, 2020

Abstract

The purpose of this research is to empirically examine firms’ incentives for accounting standards choice. Using a Japanese setting with multiple accounting standards options of equal quality, we first explore the association between Japanese firms’ IFRS adoption and network effects. We divide firms’ network into direct and indirect components and measure the size using four proxies. Three dependent variables capture different stages of IFRS adoption by groups of firms, that is, earlier adopters (adopted and announced) and potential adopters. Using panel data on Japanese listed firms between 2007 and 2017, multiperiod logit regressions are conducted. The results support the hypothesis that network effects are related to the adoption of IFRS. In addition, we obtain new insight into firms’ incentives to adopt IFRS, by analyzing the differences between earlier and potential adopters. While the factors examined in prior studies become weak for potential adopters over time, network effects remain significant for both earlier and potential adopters. This result suggests that network effects give firms stronger incentives to adopt IFRS than other incentive factors such as corporate governance and differences between accounting standards.

Keywords: accounting standards choice, IFRS, voluntary adoption, Japan, network effect

Suggested Citation

Kameoka, Eriko and Okumura, Masashi and Yan, Su, Firms’ Voluntary IFRS Adoption and Network Effects: An Empirical Study of Japan (February 12, 2020). Available at SSRN: https://ssrn.com/abstract=3238517 or http://dx.doi.org/10.2139/ssrn.3238517

Eriko Kameoka (Contact Author)

Tohoku University ( email )

2-1-1 Katahira, Aoba-ku
Sendai, 9800802
Japan

Tohoku University - Economics & Management ( email )

2-1-1 Katahira, Aoba-ku
Sendai, 9800802
Japan

Masashi Okumura

Waseda University - Graduate School of Commerce ( email )

1-6-1, Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050
Japan

Su Yan

Waseda University ( email )

1-6-1, Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050
Japan
0081-80-4138-0812 (Phone)

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