Economic consequences of IFRS convergence: evidence from phased manner implementation in India
Journal of Asia Business Studies
ISSN: 1558-7894
Article publication date: 10 February 2022
Issue publication date: 17 January 2023
Abstract
Purpose
This study is to examine the economic consequences of International Financial Reporting Standards (IFRS) converged standards by exploring its phased manner implementation in India.
Design/methodology/approach
The study measures the economic outcomes in the form of capital market reactions such as cost of equity capital, cost of debt capital, information asymmetry and market liquidity. Difference-in-difference (DiD) methodology has been used to analyze the data for this study.
Findings
Based on a sample of 2,685 Bombay Stock Exchange (BSE) listed firms, results show that the Indian capital market reacts negatively to the adoption of IFRS-converged standards. In particular, results show that the cost of equity capital, cost of debt capital and information asymmetry have been increased and market liquidity has been decreased for test firms relative to benchmark firms immediately after IFRS convergence and this negative effect is more pronounced among small firms than large firms. Subsequent tests suggest that test firms have better capital market reactions in the later year of implementation relative to benchmark firms that are implementing IFRS for the first time. It indicates the learning curve effect of IFRS on the economic outcomes as negative impact ameliorates over time.
Originality/value
The study is among earlier attempts to investigate the impact of IFRS on capital market reactions by exploring the phased manner implementation framework. The study is also among the pioneering attempts to examine the learning curve impact of IFRS on capital market reactions.
Keywords
Citation
Bansal, M. (2023), "Economic consequences of IFRS convergence: evidence from phased manner implementation in India", Journal of Asia Business Studies, Vol. 17 No. 1, pp. 129-148. https://doi.org/10.1108/JABS-10-2021-0414
Publisher
:Emerald Publishing Limited
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