Did the Adoption of IFRS Encourage Cross-Border Investment?

Proponents of International Financial Reporting Standards (IFRS) claimed that the adoption of IFRS would lead to more efficient capital allocation through greater cross-border investment. This study examines whether the adoption of IFRS is associated with an increase in the level of investment in foreign equities held by Australian investors. The results show that the adoption of IFRS is associated with greater cross-border equity investment. The results are consistent with investors benefitting from a reduction in information asymmetry through an increase in the comparability of financial reports