The impact of International Financial Reporting Standards adoption on the integration of capital markets

Abstract

AbstractIntegrated capital markets provide better risk sharing and market efficiency, but presence of different barriers such as information asymmetry across borders hinders these benefits. This study investigates whether the adoption of International Financial Reporting Standards (IFRS) (uniform accounting standards) impacts the integration of worldwide capital markets by decreasing financial information frictions. Staggered adoption dates with price‐based measures (Beta and Sigma Convergence) of integration are used to measure the incremental impact of IFRS adoption on integration. The sample includes all the countries with capital markets that have benchmark indices and price data available. Overall statistical results suggest no significant impact of IFRS adoption on capital market integration.