The Effect of Mandatory IFRS Adoption on International Cross-Listings

ABSTRACT Using a comprehensive dataset of international cross-listings spanning 34 (50) home (target) countries, we examine whether mandatory IFRS adoption facilitates firms' cross-listing activities. Our results using difference-in-differences analyses show that firms that mandatorily adopt IFRS exhibit significantly higher cross-listing propensity and intensity following IFRS adoption. We also find that firms from mandatory IFRS adoption countries are more likely to cross-list their securities in countries also mandating IFRS and countries with larger and more liquid capital markets. We further find that IFRS adoption has a greater effect on mandatory IFRS adopters from countries with larger accounting differences from IFRS, lower disclosure requirements, and less access to external capital prior to IFRS adoption. Our findings are consistent with the notion that mandatory IFRS adoption facilitates firms' cross-listing activities and highlight the importance of considering the change in cross-listings when examining the capital market consequences of mandatory IFRS adoption.