Title: Effects of mandatory adoption of IFRS on market liquidity in Brazil

Authors: Ricardo Luiz Menezes Silva; Paula Carolina Ciampaglia Nardi

Addresses: School of Economics, Business Administration and Accounting at Ribeirao Preto, University of Sao Paulo, Bandeirantes Avenue, 3900, Vila Monte Alegre, 14040905 Ribeirao Preto SP, Brazil ' School of Economics, Business Administration and Accounting at Ribeirao Preto, University of Sao Paulo, Bandeirantes Avenue, 3900, Vila Monte Alegre, 14040905 Ribeirao Preto SP, Brazil

Abstract: The mandatory International Financial Reporting Standard (IFRS) adoption extended to all companies listed on the stock exchange in Brazil. Some advocates that the quality of financial statements under IFRS is superior, providing many benefits to market participants, such as increased stock liquidity. Liquidity has been less explored in Brazil though, representing a research opportunity without the influence of confounding events. Therefore, the aim of this study is to analyse the effects of mandatory IFRS adoption on stock liquidity in Brazil. The findings confirm the research hypothesis, indicating that the mandatory adoption is not associated with increased stock liquidity. These results can be explained by the limited disclosure incentives. In addition, no change is found in terms of reporting enforcement. Our findings show that the international regulator still faces challenges due to cultural and institutional aspects. The lack of an international regulator casts doubts on greater uniformity in the application of IFRS.

Keywords: adoption of IFRS; stock liquidity; Brazil; quality of financial statements.

DOI: 10.1504/IJAAPE.2020.106763

International Journal of Accounting, Auditing and Performance Evaluation, 2020 Vol.16 No.1, pp.1 - 24

Accepted: 15 Oct 2019
Published online: 14 Apr 2020 *

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