The Impact of Voluntary and Mandatory IAS/IFRS Adoption: A Review
Several studies examined the capital market effects and the impact on accounting quality after the mandatory IAS/IFRS adoption. Two different approaches have been widely adopted: the pro-standard and the pro-incentive. According to the former, the IAS/IFRS standards have a positive impact as a result of their higher quality, compared to local GAAP. On the other hand, the pro-incentive approach emphasizes the importance of incentives, especially ones related to the institutional settings, and predicts greater effects in countries characterized by strong legal systems and effective enforcement mechanisms. The most recent empirical evidence seems to support the pro-incentive approach. This literature review underlines the evolution of this research stream, stressing the different used approaches, in order to explain their mixed results, and trying to explain the implied reasons why recent papers move to a different approach which seems to provide a finer and more dynamic interpretation of the pro-incentive hypothesis, weakening the presumed influence of the preexisting legal systems and underlining the role played by firms’ incentives per se and by changes in enforcement mechanisms.