Assessing the Investment Impact of IFRS Adoption with an Investment Euler Equation
Assessing the Investment Impact of IFRS Adoption with an Investment Euler Equation
황이석(College of Business Administration, Seoul National University); 김예원(Department of Business Administration, Sejong University); 이우종(College of Business Administration, Seoul National University)
49권 5호, 1~35쪽
초록
The financing effect of IFRS adoption is one of the most studied topics in the literature. Firms in IFRS-adopting countries typically experience an increase in stock liquidity and hence a decrease in the cost of raising capital. Although this literature generally indicates capital market benefits of IFRS adoption, how such benefits translate into managers’ investment decisions remains unexplored. We fill this void. We tackle this issue by applying an investment Euler equation with the generalized method of moments (GMM). Specifically, we borrow the investment model to estimate the rate at which managers discount expected payoffs. Analyzing Korean data for the periods from 2008 to 2013, we find that the discount rate imputed in the model significantly decreases post-IFRS. Our results suggest that the change in reporting standards indeed has a discernible effect on corporate financing and hence investment decisions. In doing so, we showcase and highlight the merit of the production-based asset pricing approach in addressing accounting questions.
Abstract
The financing effect of IFRS adoption is one of the most studied topics in the literature. Firms in IFRS-adopting countries typically experience an increase in stock liquidity and hence a decrease in the cost of raising capital. Although this literature generally indicates capital market benefits of IFRS adoption, how such benefits translate into managers’ investment decisions remains unexplored. We fill this void. We tackle this issue by applying an investment Euler equation with the generalized method of moments (GMM). Specifically, we borrow the investment model to estimate the rate at which managers discount expected payoffs. Analyzing Korean data for the periods from 2008 to 2013, we find that the discount rate imputed in the model significantly decreases post-IFRS. Our results suggest that the change in reporting standards indeed has a discernible effect on corporate financing and hence investment decisions. In doing so, we showcase and highlight the merit of the production-based asset pricing approach in addressing accounting questions.
- 발행기관:
- 한국회계학회
- 분류:
- 회계학