Mandatory IFRS Adoption, Corporate Governance and Firm Value

Abstract

We study whether financial and accounting disclosure affect firm value, by focusing on the adoption of the full International Financial Reporting Standards (IFRS) in Brazil in 2010. We claim that Brazil is a unique and ideal scenario to investigate this issue, because the country adopted IFRS in a shorter period compared to other economies, and its firms presented ex-ante cross-sectional heterogeneity in accounting quality. With a sample of Brazilian publicly-listed firms from 2004 to 2015 we use a diff-in-diff and propensity score matching techniques to compare firms with ex-ante lower quality of accounting (firms in the Regular and Level 1 tiers of corporate governance) with otherwise-similar firms that already complied with higher-quality accounting standards (firms in the Level 2 and Novo Mercado tiers) before the mandatory adoption of IFRS.