Does Public Firms’ Mandatory IFRS Reporting Crowd Out Private Firms’ Capital Investment?

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Brazil's Economic Resilience

Guests: Armando Castelar Pinheiro, former Head of the Economics Department of the Brazilian Development Bank, and Rodrigo Soares, Lemann Foundation Professor of Economics. Insper, Brazil


Key Question Being Explored in This Insight:

A study on the mandated adoption of International Financial Reporting Standards (IFRS) by publicly listed EU corporations found that private firms' capital investment falls significantly compared to public firms. Even when comparing private enterprises to firms unaffected by the IFRS rule, investment decreases. These data show that required IFRS reporting and other changes drive out private firm funding. Larger private enterprises and industries with higher external finance demand experience this effect more.

Institution: Faculti

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A study on the mandated adoption of International Financial Reporting Standards (IFRS) by publicly listed EU corporations found that private firms’ capital investment falls significantly compared to public firms. Even when comparing private enterprises to firms unaffected by the IFRS rule, investment decreases. These data show that required IFRS reporting and other changes drive out private firm funding. Larger private enterprises and industries with higher external finance demand experience this effect more.

Image courtesy of interviewee. January 9, 2024

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