The impact of International Financial Reporting Standards adoption on the integration of capital markets


Zahid R. M. A. , Simga-Mugan C.

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, 2022 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Publication Date: 2022
  • Doi Number: 10.1002/ijfe.2684
  • Journal Name: INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, ABI/INFORM, Aerospace Database, Business Source Elite, Business Source Premier, Communication Abstracts, EconLit, Geobase, Metadex, vLex, Civil Engineering Abstracts
  • Keywords: beta convergence, capital markets, information frictions, integration, international financial reporting standards, sigma convergence, MANDATORY IFRS ADOPTION, BARRIERS
  • Middle East Technical University Affiliated: Yes

Abstract

Integrated capital markets provide better risk sharing and market efficiency, but presence of different barriers such as information asymmetry across borders hinders these benefits. This study investigates whether the adoption of International Financial Reporting Standards (IFRS) (uniform accounting standards) impacts the integration of worldwide capital markets by decreasing financial information frictions. Staggered adoption dates with price-based measures (Beta and Sigma Convergence) of integration are used to measure the incremental impact of IFRS adoption on integration. The sample includes all the countries with capital markets that have benchmark indices and price data available. Overall statistical results suggest no significant impact of IFRS adoption on capital market integration.