Arbeitspapier

Economic Benefits of Adopting IFRS or US-GAAP: Have the Expected Costs of Equity Capital really decreased?

The question whether the adoption of International Financial Reporting Standards (IFRS) will result in measurable economic benefits is of special policy relevance in particular given the European Union?s decision to require the application of IFRS by listed companies from 2005/2007. In this paper, I investigate the common conjecture that internationally recognized high quality reporting standards (IAS/IFRS or US-GAAP) reduce the cost of capital of adopting firms (e.g. Levitt 1998; IASB 2002). Building on Leuz/Verrecchia (2000), I use a set of German firms which preadopted such standards before 2005, but investigate the potential economic benefits by analyzing their expected cost of equity capital utilizing and customizing available implied estimation methods (e.g. Gebhardt/Lee/Swaminathan 2001, Easton/Taylor/Shroff/Sougiannis 2002, Easton 2004). Evidence from a sample of about 13,000 HGB, 4,500 IAS/IFRS and 3,000 US-GAAP firm-month observations in the period 1993-2002 generally fails to document lower expected cost of equity capital and therefore measurable economic benefits for firms applying IAS/IFRS or US-GAAP. Accordingly, I caution to state that reporting under internationally accepted standards, per se, lowers the cost of equity capital of adopting firms.

Language
Englisch

Bibliographic citation
Series: Working Paper Series: Finance & Accounting ; No. 131

Classification
Wirtschaft
Accounting
Subject
Kapitalkosten
International Financial Reporting Standards
Grundsätze ordnungsmässiger Buchführung
Einführung
Kosten-Nutzen-Analyse
Deutschland

Event
Geistige Schöpfung
(who)
Daske, Holger
Event
Veröffentlichung
(who)
Johann Wolfgang Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften
(where)
Frankfurt a. M.
(when)
2004

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Daske, Holger
  • Johann Wolfgang Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften

Time of origin

  • 2004

Other Objects (12)