Financial Reporting Regulation, Information Asymmetry and Financing Decisions around the World

We study the influence of a major reform in financial reporting regulation – the adoption of the International Financial Reporting Standards (IFRS) – on financial decisions around the world. We find that post-IFRS: (i) firms are more likely to raise external financing and (ii) firms increase their use of equity capital if they experience a decrease in information asymmetry, operate in a high growth industry, or have high financial distress. Our findings highlight the importance of financial reporting regulation in explaining financing policies around the world. Current draft: July 2013 _______________ * Corresponding author contact information: 100 Main street, Cambridge, MA 02142; Phone: (617) 253-2956; Email: [email protected]. We thank Manuel Adelino, John Core, Xavier Giroud, Michelle Hanlon, Gustavo Manso, Stewart Myers, Jeff Ng, Scott Richardson, Antoinette Schoar, Nemit Shroff, Eric So, Jerry Zimmerman, and workshop participants at University of British Columbia, Catholic-Lisbon University, EAA Annual Congress 2013, INSEAD, LBS, MIT, Penn State and conference participants at the 2013 IAS conference for helpful comments. We gratefully acknowledge the financial support of the MIT Sloan School of Management. Patricia Naranjo is also grateful for financial support from the Deloitte Foundation.