Global IFRS adoption and Cross-Border Investments by Retail Investors


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Abstract

This paper examines whether mandatory IFRS adoption around the world enhanced cross-border investments by retail investors. The Open Market at the Frankfurt Stock Exchange, a segment designed particularly to enable German retail investors to trade in foreign stocks, provides a unique setting to address this research question. Using an initial sample of traded stocks of over 9,000 foreign firms from 26 countries, we document that Open Market trading activity in shares of IFRS adopting companies increased significantly, both in absolute terms as well as relative to the stocks of non-adopting firms. Given the specific institutional set-up and nature of the Open Market, we interpret this finding as evidence that the introduction of IFRS triggered cross-border investments by retail investors.
 
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Paolo Perego
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