Journal article

Accounting Standards Harmonization and Financial Integration

Y Li, Dan Dhaliwal, Wen He, Raynolde Pereira

Contemporary Accounting Research | Canadian Academic Accounting Association | Published : 2019


We empirically examine whether adopting a uniform set of accounting standards mitigates information frictions in financial markets and facilitates market integration. Using a difference‐in‐difference design, we find that after the mandatory adoption of International Financial Reporting Standards (IFRS), local stock returns incorporate more global information and at a faster speed. The effect of IFRS adoption is stronger in countries where there are larger improvements in accounting comparability and for firms with a larger increase in foreign ownership. Overall, our results suggest that accounting standards harmonization facilitates financial market integration.

University of Melbourne Researchers


Funding Acknowledgements

Accepted by Michael Welker. We are grateful to the valuable comments and suggestions from two anonymous referees, Michael Welker, Jeff Pittman, Margaret Abernethy, Jeffrey Callen, Mark DeFond, Bin Ke, Charles Lee, Matthew Pinnuck, Shiva Rajgopal, Eddie Riedl (discussant), Jianfeng Shen, Siew Hong Teoh, Joanna Wu (discussant), and Bohui Zhang. This paper has also benefited from the comments of the discussants and workshop participants at the FARS 2013 Conference, EAA 2013 Annual Congress, CAAA 2013 Annual Conference, AAA 2013 Annual Meeting, MIT-Asia 2014 Conference, University of Queensland, University of Melbourne, University of Western Australia, and Xiamen University. Yan Li acknowledges financial support from Singapore MOE Tier 1 Academic Research Fund.