Meta-Analysis of the Impact of Adoption of IFRS on Financial Reporting Comparability, Market Liquidity, and Cost of Capital

A large number of empirical studies have addressed the effects of adoption of IFRS, but the results have been mixed. We use a meta-analysis of 55 empirical studies with 1,259 effect sizes to determine the impact of adoption of IFRS on financial reporting comparability, market liquidity, cost of equity and cost of debt. This approach provides an objective view of the empirical results, in contrast to narrative reviews, which offer subjective conclusions. We find that IFRS adoption has increased financial reporting comparability, market liquidity, and reduced cost of equity. For cost of debt, decrease is observed only for voluntary adoption. Our meta-regression analysis shows how the results differ across mandatory and voluntary adoption of IFRS and that the measurement choices, type of control variables, study design, and strength of results explain the variation in the observed effect of adoption of IFRS. We emphasise the importance of these study characteristics and call for further studies using more recent data, on the debt market, and the long-term effect of IFRS adoption. This study should be of interest to regulators and policymakers as they are expected to assess the impacts of adoption of IFRS