Investigation on determinants of early adoption of K-IFRS

Abstract

Using a sample of Korean companies during 2008 to 2009, this paper investigates the factors leading to early adoption of K-IRFS. Specifically, the role of off-balance sheet liability in IFRS adoption decision is the main interest. To capture the evidence of off-balance sheet liabilities, I employ firms overall financial ratings, leverage ratios, and the existences of keywords implying off-balance sheet liabilities as independent variables. The result of the main test confirms that cross-listed and bigger-sized firms are inclined to adopt K-IFRS voluntarily. However, other hypotheses are all rejected. In subsequent tests where cross-listing, Size, and ROA are controlled, the result was not different. This means off-balance sheet liabilities, dependency on foreign sales, planned stock offerings, concentration of stock ownership do not affect the decision of IFRS adoption, at least in the Korean corporation setting. However, the possibility that an insufficient number of the early adopters and the short sample period might distort the test cannot be ruled out. Also, better proxies of off-balance sheet liabilities might have yielded a better result if had been employed.