Does financial reporting regulation influence the value of cash holdings?

Research output: Contribution to journalArticle (Academic Journal)peer-review


We investigate how the value of cash holdings changes following the mandatory adoption of International Financial Reporting Standards (IFRS), which is viewed as an exogenous shock to information asymmetry between firms and outside investors. Using firm-level data from 47 countries, we find that mandatory IFRS adoption has a negative and significant impact on the value of cash holdings. This result suggests that investors reduce their valuation of cash holdings when firms can have access to external financing at a lower cost under IFRS. The negative effect of IFRS is concentrated among financially constrained firms. Furthermore, we show that the effect is more pronounced in countries with strong legal enforcement. Overall, our evidence highlights that financial reporting regulation can have a significant effect on how outside investors value corporate cash holdings across countries.
Original languageEnglish
Pages (from-to)52
Number of pages67
JournalJournal of Empirical Finance
Publication statusAccepted/In press - 15 Sep 2020


  • International Financial Reporting Standards (IFRS)
  • Market value of cash holdings
  • Cash holdings


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