Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    Why Do Countries Adopt International Financial Reporting Standards?
    25 Jun 2009Working Paper Summaries

    Why Do Countries Adopt International Financial Reporting Standards?

    by Karthik Ramanna and Ewa Sletten
    Why do some countries adopt the European Union (EU)-based International Financial Reporting Standards (IFRS) when others do not? To expand our understanding of the determinants and consequences of IFRS adoption on a global sample, HBS professor Karthik Ramanna and MIT Sloan School of Management coauthor Ewa Sletten studied variations over time in the decision to adopt these standards in more than a hundred non-EU countries. Understanding countries' adoption decisions can provide insights into the benefits and costs of IFRS adoption. Key concepts include:
    • Countries with high quality corporate governance systems and more powerful countries are less likely to adopt IFRS.
    • There are network benefits to IFRS adoption, i.e., the likelihood of IFRS adoption for a given country increases with the number of IFRS adopters in its geographical region and with IFRS adoption among its trade partners.
    • As more countries adopt the international standards, the relative import of network benefits from IFRS adoption (over direct economic benefits) are likely to increase. Similar effects might be seen in the adoption of accounting methods and standards, and of corporate governance best practices by firms and jurisdictions.
    LinkedIn
    Email

    Author Abstract

    In a sample of 102 non-European Union countries, we study variations in the decision to adopt International Financial Reporting Standards (IFRS). There is evidence that more powerful countries are less likely to adopt IFRS, consistent with more powerful countries being less willing to surrender standard-setting authority to an international body. There is also evidence that the likelihood of IFRS adoption at first increases and then decreases in the quality of countries' domestic governance institutions, consistent with IFRS being adopted when governments are capable of timely decision making and when the opportunity and switching cost of domestic standards are relatively low. We do not find evidence that levels of and expected changes in foreign trade and investment flows in a country affect its adoption decision: thus, we cannot confirm that IFRS lowers information costs in more globalized economies. Consistent with the presence of network effects in IFRS adoption, we find that a country is more likely to adopt IFRS if its trade partners or countries within in its geographical region are IFRS adopters. 48 pages.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: March 2009
    • HBS Working Paper Number: 09-102
    • Faculty Unit(s): Accounting and Management
      Trending
        • 31 Jan 2023
        • Research & Ideas

        It’s Not All About Pay: College Grads Want Jobs That ‘Change the World’

        • 25 Jan 2022
        • Research & Ideas

        More Proof That Money Can Buy Happiness (or a Life with Less Stress)

        • 17 Jan 2023
        • In Practice

        8 Trends to Watch in 2023

        • 25 Feb 2019
        • Research & Ideas

        How Gender Stereotypes Kill a Woman’s Self-Confidence

        • 17 May 2017
        • Research & Ideas

        Minorities Who 'Whiten' Job Resumes Get More Interviews

    Find Related Articles
    • Financial Reporting
    • International Accounting
    • Globalized Economies and Regions
    • Network Effects
    • Adoption
    • Accounting

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College