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

Abstract

This article seeks to contribute to International Financial Reporting Standards (IFRS) literature by examining the effects of adopting IFRS on stock market performance worldwide from the diffusion of innovation theory perspective. Our study revealed several interesting findings after using combinations of unique panel data sets from 110 countries worldwide and conducting a robust empirical analysis from 1995 to 2014. First, we found a positive association between late mandatory IFRS adoption and stock market integration in Europe. Second, our findings indicate a significant negative association between early IFRS adoption and the following financial indicators: stock market trading volumes, stock market capitalization, market turnover, and market 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 significant practical and policy implications for regulators and policymakers of multinational corporations.

Benefits and costs of adopting international financial reporting standards

“…In addition, the transition to IFRS requires countries to make improvements to achieve high-quality financial reporting (Bedford, Bugeja, & Ma, 2022;Elmghaamez, Attah-Boakye, Adams, & Agyemang, 2022;Soderstrom & Sun, 2007). The accounting system is part of a country's overall regulatory system (Ball, 2001).…”

Organizational ambidexterity from the emerging market perspective: A review and research agenda

“…The differentiation view puts forward that pursuits of both exploration and exploitation are incompatible as they compete for the same organizational resources (Gibson & Birkinshaw, 2004). The integration view, on the other hand, argues that simultaneous engagement in these activities has complimentary benefits (Elmghaamez, Attah‐Boakye, Adams, & Agyemang, 2022; Gibson & Birkinshaw, 2004). The broad theoretical developments in the approach to ambidexterity are sequential, simultaneous, and contextual methods, which identify with the four concepts of ambidexterity: cyclical, partitional, reciprocal, and harmonic ambidexterity (Brix, 2019).…”

Diffusion theory, transnational antecedents and International Standards on Auditing adoption around the world

“…However, and given that the adoption of accounting innovations can vary among countries based on the adopter‐specific characteristics and the time of adoption (Rogers, 2003), we rely on the diffusion of innovation (DOI) theory to develop our hypotheses and interpret our findings. Noticeably, previous studies have mainly applied DOI to explain the rapid diffusion of management accounting innovations (Jackson & Lapsley, 2003; Sisaye & Birnberg, 2010; Tucker & Lowe, 2014) and to illustrate International Financial Reporting Standards (IFRS) adoption (Dayyala et al, 2020; El‐Helaly et al, 2020; Elmghaamez et al, 2022). To the best of our knowledge, very few empirical studies have employed DOI theory to explain the diffusion and early adoption of ISAs (Elmghaamez et al, 2020).…”