Mandatory adoption of International Financial Reporting Standards (IFRS), accounting quality and investment decision for Latin American firms

• Grant number: 19/07538-2
• Support Opportunities: Regular Research Grants
• Start date: November 01, 2019
• End date: October 31, 2022
• Field of knowledge: Applied Social Sciences - Administration - Accounting
• Agreement: University of Birmingham
• Principal Investigator: Marcelo Botelho da Costa Moraes
• Grantee: Marcelo Botelho da Costa Moraes
• Principal researcher abroad: Chun Yu Mak
• Institution abroad: University of Birmingham, England
• Host Institution: Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto (FEARP). Universidade de São Paulo (USP). Ribeirão Preto , SP, Brazil
• Associated researchers: Carlos Alberto Dorantes Dosamantes

Abstract

This project aims to investigate whether Latin American firms can benefit from the mandatory adoption of International Financial Reporting Standards (IFRS), by evaluating the impact of IFRS adoption, institutional settings and firm-level incentives on firms' accounting information quality, debt and equity financing and institutional investment decisions, which are the key components for the development of capital markets. We adopt standard event time approach to analyse the archival data obtained from the commercial sources with investigating both the short term (1 year) and long term effect (5 years) of IFRS adoption. This is essential to reflect the latest situation of implementing IFRS in Latin American countries and to explore the key factors required to be considered at IFRS adoption. In turn, this project directly addresses the concern of the International Accounting Standard Board (IASB, 2005) and regulators for research to be conducted on IFRS adoption in developing countries, by demonstrating the impact of IFRS and the firm-level incentives on accounting information quality under weak institutional settings, the changes in information environment and the shift in debt financing and institutional investment decisions. Research findings of this project will inform international and local regulators about the roles of institutional settings and firm-level incentives related to IFRS adoption and implementation. How do firms implement IFRS? This research also helps investors to identify what kind of firms will adopt IFRS and improve accounting information quality. Like the mandatory IFRS adoption, this research will contribute to the implementation of IFRS and the development of the capital market in the Latin American countries. (AU)