AAA Spark Meeting of Regions

the Cost-Benefit Tradeoff of IFRS Implementation: Delistings of European Firms in the Post-IRFS Adoption Period

• In Event: Whistleblowing and IFRS Adoption

Abstract

In this paper, we provide evidence about the firm-level net effect of implementing the International Financial Reporting Standards (IFRS). In pre/post analyses, we examine the association between implementation of IFRS and the change in the probability of firms delisting in seven European economies committed to the standards and seven economies applying IFRS leniently. Our findings indicate an increased probability of firms delisting from the pre- to the post-IFRS adoption period. However, this increase is limited to involuntary delistings in economies committed to adopting IFRS. We further test how the firm-level net effect of post-2005 IFRS pronouncements relates to firms delisting and how investors react to these delistings. Our results show that in the post-adoption period, delisting increases only among net cost firms in committed jurisdictions and investors react most negatively to these delistings. Our results have implications for the timing of IFRS adoption and speak to the consequences of IFRS implementation.

Authors

• Maria Rykaczewski, Arizona State University

• Elizabeth Gutierrez, Universidad de Chile

• Maria Ivanova Vulcheva, Florida International University