Mandatory Adoption of IFRS in Canada and its Effect on International Stock Listings

• In Event: Accounting

Abstract

This study investigates if there is an increase in the new non-North American (non-N.A.) listings in the Canadian stock exchanges after the adoption period of IFRS in Canada in 2011 relative to such increase in listings on the U.S. stock exchanges. In the post-IFRS adoption period in Canada, both Canadian and non-N.A. firms produced financial statements for the first time under common IFRS. This study argues that non-N.A. firms may be more motivated to list in the Canadian stock exchanges in the post-IFRS adoption period, as Canadian investors would be more receptive to more comparable financial statements of non-N.A. firms with their Canadian counterparts. Our study finds no significant increase between the average number of new non-N.A. listings in Canadian stock exchanges relative to such listings in the U.S. stock exchanges. We document that Canadian stock markets could not benefit in terms of increase in new non-N.A. international listings as a result of mandatory adoption of IFRS in Canada. In the pre-IFRS adoption period, Canada already had a solid reputation as a destination for international listings. IFRS’s adoption in Canada was not such a significant motivating factor for international firms to list in the Canadian stock exchanges.

Authors

• Shahid Khan, Penn State University - Berks

• Khaled Abdou, Penn State University Berks

• Sudip Ghosh, Penn State University Berks