Did mandatory IFRS adoption affect the cost of capital in Latin American countries?

André Aroldo Freitas de Moura, Aljaohra Altuwaijri, Jairaj Gupta

    Research output: Contribution to journalArticlepeer-review

    3 Citations (Scopus)


    This study investigates whether mandatory adoption of International Financial Reporting Standards (IFRS) has affected the long-term cost of equity and debt in Latin America, where the enforcement of accounting standards and investor protection mechanisms are weak in comparison to developed nations. Analyzing a sample of firms from Argentina, Brazil, Chile, Mexico, and Peru, we show that mandatory IFRS adoption led to reduction in the cost of equity even after controlling for firm-level reporting incentives. Test results also show that the cost of debt was reduced significantly after the IFRS adoption. Our results suggest that enhanced disclosure and comparability stemming from IFRS in comparison to previous domestic accounting standards helped to mitigate the information asymmetry problem, and resulted in positive economic consequences for Latin American firms.
    Original languageEnglish
    Article number100301
    Pages (from-to)1-18
    Number of pages18
    JournalJournal of International Accounting, Auditing and Taxation
    Early online date15 Feb 2020
    Publication statusPublished - Mar 2020


    • IFRS
    • Cost of equity
    • Cost of debt
    • Investors
    • Debt holders
    • Latin American structuralism


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