IFRS adoption, information asymmetry and the home bias

Abstract

This paper investigates whether IFRS adoption reduces the home bias equity using the information asymmetry as a mediator variable to this relationship. Focusing in countries included in the Coordinated Portfolio Investment Survey “CPIS” our sample is composed by 512 observations (country-year) that cover the period 2003 to 2012. Our finding indicates that the full IFRS adoption reduces the information asymmetry and then the home bias. These results validate our expectations. Nevertheless, the partial IFRS adoption doesn’t clearly support our expectations. We found that the partial IFRS adoption increases significantly the information asymmetry but reduces the home bias. This paper examined the effect of others factors that prior researches indicate that they affect the home bias as the governance indicators, the economic indicators, equity market characteristics and the capital controls.