Abstract
AbstractThis paper presents evidence that Canada's 2011 adoption of IFRS improved Canadian firms' access to external financing. We use a matched sample of Canadian and US firms and find that the marginal value of cash decreased significantly in Canadian firms following mandatory IFRS adoption in Canada. The post‐IFRS decrease in the marginal value of cash is most evident for firms that have a larger number of similar firms in non‐Canadian IFRS regimes. This is consistent with IFRS creating a uniform set of accounting standards that lowers the information costs of cross‐border financing. We also find larger IFRS‐related decreases in the value of cash for firms with high growth potential and low availability of internal cash.
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