Economic Benefits of Adopting IFRS or US-GAAP : Have the Expected Costs of Equity Capital really decreased?

The question whether the adoption of International Financial Reporting Standards (IFRS) will result in measurable economic benefits is of special policy relevance in particular given the European Union’s decision to requ
The question whether the adoption of International Financial Reporting Standards (IFRS) will result in measurable economic benefits is of special policy relevance in particular given the European Union’s decision to require the application of IFRS by listed companies from 2005/2007. In this paper, I investigate the common con-jecture that internationally recognized high quality reporting standards (IAS/IFRS or US-GAAP) reduce the cost of capital of adopting firms (e.g. Levitt 1998; IASB 2002). Building on Leuz/Verrecchia (2000), I use a set of German firms which pre-adopted such standards before 2005, but investigate the potential economic benefits by analyzing their expected cost of equity capital utilizing and customizing avail-able implied estimation methods (e.g. Gebhardt/Lee/Swaminathan 2001, Easton/Taylor/Shroff/Sougiannis 2002, Easton 2004). Evidence from a sample of about 13,000 HGB, 4,500 IAS/IFRS and 3,000 US-GAAP firm-month observations in the period 1993-2002 generally fails to document lower expected cost of equity capital and therefore measurable economic benefits for firms applying IAS/IFRS or US-GAAP. Accordingly, I caution to state that reporting under internationally accepted standards, per se, lowers the cost of equity capital of adopting firms. JEL Classification: M41
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Metadaten
Author:Holger Daske
URN:urn:nbn:de:hebis:30-17712
Series (Serial Number):Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (131)
Document Type:Working Paper
Language:English
Date of Publication (online):2005/10/06
Year of first Publication:2004
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2005/10/06
SWD-Keyword:Kapitalkosten / International Financial Reporting Standards / Grundsätze ordnungsmässiger Buchführung / Einführung / Kosten-Nutzen-Analyse / Deutschla
Source:Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting ; 131
HeBIS PPN:18888050X
Institutes:Wirtschaftswissenschaften
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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