The diffusion of innovation theory and the effects of IFRS adoption by multinational corporations on capital market performance: a cross-country analysis

Kweku Adams, Ibrahim Elmghaamez, Rexford Attah-Boakye, Jacob Agyemang

Research output: Contribution to journalArticlepeer-review

Abstract

This paper seeks to contribute to IFRS literature by examining the effects of adopting international financial reporting standards (IFRS) on stock market performance around the world from the perspective of the diffusion of innovation theory. Using combinations of unique panel data sets from 110 countries around the world, spanning 1995-2014, and carrying out a robust empirical analysis, our study revealed several interesting findings. First, we find a positive association between the late mandatory IFRS adoption and EU stock market integration. Second, our findings indicate a significant negative association between the early IFRS adoption and the following financial indicators: stock market trading volumes, stock market capitalisation, stock market turnover, and return. Third, our study reveals an insignificant association between early IFRS adoption and stock price volatility alongside stock market development. Our findings are robust and have important practical and policy implications for regulators and policymakers of multinational corporations.
Original languageEnglish
JournalThunderbird International Business Review
Publication statusAccepted/In press - 5 Aug 2021

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