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Abstract

This study examines how mandatory IFRS adoption influences international investors" ownership and decisions. Based on a sample of French firms listed on the SBF 120 stock index, we find that international accounting harmonization leads to attract foreign equity to France. Investors become more confident and transactions are more transparent, which facilitates decision making. We try also to understand the characteristics and influence of governance mechanisms as means of IFRS enforcement. We show that the change in foreign institutional holdings depends on effective enforcement. However, corporate governance mechanisms are not all efficient in enforcing these standards in France. Indeed, a high audit quality represents a key factor which can help firms to attract non domestic shareholders, but the passivity of the independent board members is clear for the French companies of our sample.

International Financial Reporting Standards Adoption, Investor Protection, and Foreign Portfolio Investment: A Review

“…Familiarity is one of the critical issues that prior studies consider explaining the relationship between IFRS adoption and FPI. A number of literary works (Bradshaw, Bushee, & Miller, 2004;Covring, Defond, & Hung, 2007;Amiram, 2012;Hamberg et al, 2013;Yu & Wahid, 2014;Garrouch 2016) find that familiarity of investors on accounting standards assists investment decisions and thereby, encourages FPI. Their findings are rational with the claims that the IFRS adoption facilitates investors in evaluating the performance of foreign firms and the market by establishing uniform accounting or reporting standards (Amiram, 2012).…”

“…Transparency is an essential issue in explaining information asymmetry as well as the relationship between IFRS and FPI. Prior empirical studies (Aggarwal, Klapper, & Wysocki, 2005;Brüggemann, 2011;Hansen, Miletkov, & Wintoki, 2013;Hansen et al, 2015;Garrouch, 2016) claim that the transparency effect of IFRS is positively associated with FPI. Their outcomes are consistent with the claims that transparency decreases information asymmetries, strengthens the comparability effect (Nnadi & Soobaroyen, 2015), and promotes foreign investment (Babío & Muiño, 2005;Márquez-Ramos, 2011).…”

Effects of IFRS on Accounting Information Quality: Evidence for Brazil

“…For France, Garrouch (2016) finds an increase in investments due to the adoption of the standards. In the United Kingdom, Iatridis (2010) notes that the adoption of IFRS reduces the possibility of management results and increases the relevance of the information.…”