The Role of Similar Accounting Standards in Cross-Border Mergers and Acquisitions

Jere R. Francis, Xiaochuan Huang, Inder K. Khurana

Research output: Contribution to journalArticlepeer-review

37 Scopus citations


This study investigates whether differences in accounting standards across countries create information costs that inhibit firms from investing in foreign markets. Using the frequency and dollar magnitude of cross-border mergers and acquisitions (M&As) from 32 countries over the period 1998–2004, we find that the aggregate volume of M&A activity across country pairs is larger for pairs of countries with similar Generally Accepted Accounting Principles (GAAP), and that this increased volume of M&A activity is driven by target countries that also have strong enforcement. We also find that the 2005 mandatory adoption of International Financial Reporting Standard (IFRS) attracted more cross-border M&As among IFRS-adopting countries, and that this increase in M&A activity within the IFRS countries is more pronounced for country pairs with low similarity in GAAP in the pre-IFRS adoption period. Overall, our results highlight the role of accounting standards and enforcement in shaping cross-border M&A activity.

Original languageEnglish (US)
Pages (from-to)1298-1330
Number of pages33
JournalContemporary Accounting Research
Issue number3
StatePublished - 2016

ASJC Scopus subject areas

  • Economics and Econometrics
  • Accounting
  • Finance


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