How do Individual Investors React to Global IFRS Adoption?

We examine the impact of global IFRS adoption on cross-border equity investments by individual investors. Our proxy for cross-border equity investments is trading volume in the Open Market at Frankfurt Stock Exchange. The Open Market is a segment designed for German individual investors to trade a large selection of foreign stocks. Using a sample of 5,637 firms from 31 countries around the world, we find that stocks experience a significant increase in Open Market trading volume following mandatory adoption of IFRS. This effect is more pronounced for attention-grabbing stocks (e.g., stocks experiencing an increase in media coverage following IFRS adoption). Our results suggest that global IFRS adoption enhances cross-border equity investments by individual investors. However, this effect does not materialize equally across stocks due individual investors’ limited attention.

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