 Did mandatory IFRS adoption affect the cost of capital in Latin American countries?André Aroldo Freitas de Moura, Aljaohra Altuwaijri and Jairaj Gupta Journal of International Accounting, Auditing and Taxation, 2020, vol. 38, issue C Abstract: This study investigates whether mandatory adoption of International Financial Reporting Standards (IFRS) has affected the long-term cost of equity and debt in Latin America, where the enforcement of accounting standards and investor protection mechanisms are weak in comparison to developed nations. Analyzing a sample of firms from Argentina, Brazil, Chile, Mexico, and Peru, we show that mandatory IFRS adoption led to reduction in the cost of equity even after controlling for firm-level reporting incentives. Test results also show that the cost of debt was reduced significantly after the IFRS adoption. Our results suggest that enhanced disclosure and comparability stemming from IFRS in comparison to previous domestic accounting standards helped to mitigate the information asymmetry problem, and resulted in positive economic consequences for Latin American firms. Keywords: IFRS; Cost of equity; Cost of debt; Investors; Debt holders; Latin America (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jiaata:v:38:y:2020:i:c:s1061951820300021 DOI: 10.1016/j.intaccaudtax.2020.100301 Access Statistics for this article Journal of International Accounting, Auditing and Taxation is currently edited by R. Larson More articles in Journal of International Accounting, Auditing and Taxation from Elsevier |
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