IFRS adoption, financial reporting quality and cost of capital: a life cycle perspective
Article publication date: 3 May 2019
Issue publication date: 8 October 2019
This paper aims to investigate the impact of International Financial Reporting Standards (IFRS) adoption on financial reporting quality and cost of equity. The paper further investigates whether such association varies at different life cycle stages.
This paper follows the methodologies of DeAngelo et al. (2006) and Dickinson (2011) to develop proxies for the firms’ stages in the life cycle.
Using both pre- and post-IFRS adoption period for Australian listed companies, the paper finds that financial reporting quality reduced and cost of equity increased because of the adoption of IFRS. The paper further evidences that financial reporting quality in the post-IFRS period increased cost of equity. Finally, the paper finds that mature firms produce a better quality of earnings, which result in lower cost of capital. The results indicate that a mature firm was benefited because of the adoption of IFRS.
The finding of this research is useful to the regulators and practitioners to understand the widespread benefit of IFRS adoption.
Habib, A., Bhuiyan, M.B.U. and Hasan, M.M. (2019), "IFRS adoption, financial reporting quality and cost of capital: a life cycle perspective", Pacific Accounting Review, Vol. 31 No. 3, pp. 497-522. https://doi.org/10.1108/PAR-08-2016-0073
Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited