Home and Foreign Host Country IFRS Adoption and Cross-Delisting

• In Event: IFRS Adoption 2

Abstract

The purpose of this study is to examine whether and how mandatory International Financial Reporting Standards (IFRS) adoption in a cross-listing firm’s home or foreign host country affects a firm’s delisting decision. Difference-in-difference analyses of a comprehensive sample of international cross-delisting, in which firms cease their foreign cross-listings but continue to trade their securities in their home countries, show that the IFRS adoption in foreign host countries increases (decreases) the delisting propensity of cross-listing firms domiciled in non-IFRS (IFRS) adoption home countries. Results from cross-sectional tests suggest that the increased cross-delisting propensity in the post IFRS adoption period is more pronounced in foreign host countries with higher GAAP differences relative to IFRS and in countries where multinational enterprises (MNEs) have relatively lower capability to cope with institutional changes. Additional analyses reveal that delisting from foreign host countries with IFRS adoption, especially those from firms domiciled in IFRS home countries, are associated with greater negative abnormal returns, higher reduction in trading volume, fewer analysts following, and reduced foreign institutional ownership, suggesting that the negative signaling effects associated with delisting diminish firms’ delisting incentives. Overall, our study provides new insights into how mandatory adoption of IFRS affects MNEs’ cross-delisting decisions.

Authors

• Kiridaran Kanagaretnam, York University

• Xiangting Kong, Sun Yat-sen University

• Albert Tsang, York University