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

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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