Do Accounting Standards Matter for Productivity?

In this study, we examine whether productivity shifts when accounting standards change. Using mandatory International Financial Reporting Standards (IFRS) as a shock to the accounting regime, we examine the changes in country-level productivity. We find that mandatory IFRS-adopting countries experience significant increases in total factor productivity (TFP) and labor productivity. The post-adoption productivity improvements are greater for countries without IFRS convergence. Further, TFP increases more for countries that experience a larger increase in industry comparability. Taken together, the evidence suggests that the new IFRS accounting regime increases economic productivity via improving information environments and facilitating internal firm decisions.