IFRS Adoption and Institutional Investors’ Monitoring Role in Emerging Markets: Evidence from Latin-America

• In Event: IFRS Adoption 2

Abstract

Using a sample of Latin-American firms, we analyze the relation between mandatory IFRS adoption and conditional conservatism. We find that IFRS adoption boosts earnings conservatism, especially for firms with low earnings quality or high levels of investment opportunities. Evidence suggests that institutional investors play a moderating role, so the effect of IFRS adoption is stronger in firms with very low or very high levels of institutional investing. We also analyze effect of IFRS adoption on earnings quality and earnings estimation errors. By exploring different categories of institutional investors, our findings suggest that IFRS adoption is more relevant for companies where external monitoring is enhanced by accounting comparability.

Authors

• Mauricio Jara, Universidad de Chile

• Harold Lopez, Universidad de Chile

• Adriana Cabello, University of Chile