Thirteenth Global Studies Conference

Abstract

After the International Accounting Standards Board (IASB) was founded as an international accounting standards setting organization in 2001, it has taken responsibility for developing International Financial Reporting Standards (IFRS). The U.S. SEC recognized IFRS as a single set of global accounting standards and in 2008 it allowed foreign issuers to use IFRS in their financial reporting when listing on U.S. stock exchanges such as NYSE, NASDAQ, and AMEX. According to the IFRS guideline (Paul Pacter, 2017), IFRS are adopted by 150 jurisdictions and among them 140 jurisdictions have made a commitment to IFRS standards as the single set of global accounting standards and 126 jurisdictions already require the use of IFRS standards by domestic public companies as well as foreign companies. NYSE and NASDAQ are the world’s largest and the second largest stock exchanges by market capitalization at US$21 trillion and US$7 trillion respectively as of 2017. According to the survey of financial reporting disclosure levels (Saudagaran and Biddle, 1992), U.S. capital market has had the highest level of disclosure requirement in the financial reporting, which has been a major barrier for foreign private issuers to list their company on the U.S. capital market. Therefore, adoption of IFRS by U.S. capital market is a big opportunity for foreign issuers to reduce cost of listing as well as a good indicator for global accounting harmonization. In this paper, the authors investigate how IFRS affect U.S. capital market by use of trends of foreign companies listed on U.S. capital markets.