The following is a discussion of Góis, Lima, Sousa, and Malacrida (2018; hereafter, GLSM). GLSM examine the effect of national culture on the relationship between IFRS adoption and cost of equity capital. The question of whether culture enhances or limits the benefits of IFRS adoption is important to understanding the likelihood of achieving greater consistency in application and enforcement of IFRS in the future.
The adoption of IFRS by over 120 countries in a relatively short period of time marks one of the most significant changes in accounting history. Two primary goals of adopting a common reporting language worldwide are enhanced comparability across countries and increased reporting quality, with the ultimate benefits being better access to capital on more favorable terms (i.e., lower costs of debt and equity capital). Despite significant benefits documented in prior literature, application and enforcement of IFRS vary across (e.g., Daske, Hail, Leuz, and Verdi...
