Mandatory IFRS Reporting and Changes in Enforcement

Mandatory IFRS Reporting and Changes in Enforcement

Hans Christensen, Luzi Hail, Christian Leuz

Series number :

Serial Number: 

Date posted :

September 01 2013

Last revised :

September 13 2013
SSRN Share


  • International accounting • 
  • IFRS implementation • 
  • regulation • 
  • enforcement • 
  • liquidity • 
  • European Union

In recent years, reporting under International Financial Reporting Standards (IFRS) became mandatory in many countries. The capital-market effects around this change have been extensively studied, but their sources are not yet well understood. This study aims to distinguish between several potential explanations for the observed capital market effects.

We find that, across all countries, mandatory IFRS reporting had little impact on liquidity. The liquidity effects around IFRS introduction are concentrated in the European Union (EU) and limited to five EU countries that concurrently made substantive changes in reporting enforcement. There is little evidence of liquidity benefits in IFRS countries without substantive enforcement changes even when they have strong legal and regulatory systems. Moreover, we find similar liquidity effects for firms that experience enforcement changes but do not concurrently switch to IFRS. Thus, changes in reporting enforcement play a critical role for the observed liquidity benefits after mandatory IFRS adoption. In contrast, the change in accounting standards seems to have had little effect on market liquidity.


Real name:
Hans Christensen
Real name:
Research Member
The Wharton School, University of Pennsylvania