The diffusion of innovation theory and the effects of IFRS adoption by multinational corporations on capital market performance: a cross‐countryanalysis

This paper seeks to contribute to IFRS literature by examining the effects of adopting international financial reporting standards (IFRS) on stock market performance around the world from the perspective of the diffusion of innovation theory. Using combinations of unique panel data sets from 110 countries around the world spanning 1995-2014, and robust empirical analysis, our study revealed several interesting findings including the following; First, we find a positive association between the late mandatory IFRS adoption and EU stock market integration. Second, our findings indicate a significant negative association between the early IFRS adoption and the following financial indicators: stock market trading volumes, stock market capitalization, stock market turnover, and return. Third, our study revealed an insignificant association between early IFRS adoption and stock price volatility alongside stock market development. Our findings are robust and have important practical and policy implications for regulators and policymakers of multinational corporations.