Abstract
Recent literature contains a number of studies that provide evidence that improvements in the performance related to business investments are associated with the main positive results of the implementation of international financial reporting standards (hear after IFRS). This study is an effort trying to summarize empirical evidences in current literature about the effect of the IFRS adoption on investment management. We summarize literature on the effect of IFRS a) in a European setting b) in a worldwide setting. We especially refer to the effect of European Crisis on Investment Management. We summarize evidence on the impact of IFRS adoption worldwide on investments assets, foreign direct investments (FDIs), cross boarder investments (Merger and Acquisition activities) and foreign mutual fund ownership. We finally present some evidence on the impact of IFRS adoption on US home bias and try to document the impact of IFRS adoption on international listing and IPOS in global markets.
Highlights
Financial economics theories, when they focus on the area of investment efficiency, argue that the information asymmetry between firms and outside capital providers is one of the major drivers of suboptimal capital investment
This study examined the adoption of International Financial Reporting Standards (IFRS) considering uncertainty aversion diversity in countries and provided evidence that “uncertainty-averse countries benefit the most from IFRS adoption in terms of foreign direct investments (FDIs), since the improvement of accounting information, in turn, fosters financial transparency and comparability, and reduces information asymmetries and unfamiliarity among agents in different countries”
We presented existing literature on the effects of IFRS adoption on investment management, firstly under a European setting and more explicitly during the recent European crisis and secondly under a worldwide setting
Summary
Financial economics theories, when they focus on the area of investment efficiency, argue that the information asymmetry between firms and outside capital providers is one of the major drivers of suboptimal capital investment. As already known by academic literature, an important goal of financial accounting information is the reduction of adverse selection costs or moral hazard issues related to information asymmetries in order to enhance capital markets efficiency. Recent literature contains a number of studies suggesting that improvements in the performance related to business investments are associated with the main positive results of implementing international financial reporting standards (hear after IFRS). Our study is an effort trying to summarize empirical evidences in current literature about the effect of the IFRS adoption on investment management. We summarize research papers examining the impact of IFRS adoption in investment management worldwide. The rest of the paper is organized as follows: Section 2 presents evidence on the effect of IFRS adoption on investment management in Europe; Section 3 summarises existing literature on the effect during adverse economic conditions i.e. crisis period; Section 4 presents existing literature on the Effect of IFRS adoption on investment management worldwide and Section 5 concludes
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