Abstract
Abstract The process of financialisation has been extensively studied and several stylised facts identified. Short-termism is one of these. This article analyses the role that changes in accounting rules have played in increasing short-termism in company management. Our study considers the adoption of the International Financial Reporting Standards in the European Union (EU), showing that the new accounting standards have altered companies’ sensitivity to investment opportunities, leading to underinvestment in the real economy. In doing so, our article highlights the public-policy profile of accounting standards setting and possible tensions with EU societal objectives. To the best of our knowledge, this is the first study empirically analysing the role of accounting rules in the financialisation of economy.
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