Does IFRS Adoption Promote International Capital Movements? In case of Korea

Korea has adopted International Financial Reporting Standards (IFRS) since 2011. IFRS can decrease costs of information acquisition by providing foreign information users with standardized information. In addition, network effects of IFRS can create a bandwagon effect when investments and trades among firms or countries which adopt IFRS increase. This study investigates whether international capital movements are influenced by IFRS adoption, and then examines whether the role of accounting standards is different between pre－ and post－IFRS era. Using 4,272 firm－year observations, I find that the intensity of foreign inflow and exports increases after IFRS adoption. Also, the trend of international capital movements is improved after the adoption of IFRS. These findings indicate that IFRS are well established and successful accounting standards for invigorating Korean capital market and exports.