Reporting Environments and the Effectiveness of Product Development and Design: Evidence from the Global Product Design Awards

Abstract

We examine the relation between information transparency and design innovation by using the mandatory adoption of International Financial Reporting Standards (IFRS) in 2005 as an exogenous increase in information transparency. We find that firms’ mandatory adoption of IFRS is positively related to their likelihood of winning the iF design award that acknowledges excellent product/service designs. We further find that after the adoption, firms attract more international institutional investors who may better monitor and advise product design; and that the effect of the IFRS mandate is more pronounced for firms with expanded international sales that may benefit more from international markets.