Abstract
Li, Siciliano, and, Venkatachalam (hereafter LSV) propose a two-stage approach to studying the effects of the adoption of the International Financial Reporting Standards (IFRS) on economic outcomes. The key innovation of their paper is that it links the economic outcomes effect to a particular channel: disclosure quality. LSV first investigate the effect of IFRS adoption on disclosure quality, then link the change in disclosure quality to two economic outcomes: market liquidity and audit fees. To proxy for disclosure quality, the authors use the measure of line-item disclosure disaggregation in the balance sheet and income statement proposed by Chen et al. (2015). Our discussion proceeds in two steps: First, we discuss the existing literature on this topic and position LSV within it. The goal is to highlight conceptual issues and suggest opportunities for future research. Second, we discuss empirical issues related to the research design and the results. We comment on both stages of LSV’s two-stage approach and suggest possible avenues for future research on this topic.
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