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Corporate Characteristics Motivating Standardization: The Case of Accounting Convergence in European Union

Krivogorsky V, Chang JC and Black EL

To identify how corporate characteristics impact the decision to converge, we tested three groups of European firms assigned into a group by the time of the IFRS adoption. Following the theory on network externalities, we hypothesize that companies with more business complexity and higher value benefit from a positive network effect and therefore, represent a driving force in accounting standardization. We provide evidence, that a firm’s business complexity and valuation characteristics have a significant impact on IFRS adoption. We also document that the extenuating effects of jurisdictions and national levels of bureaucratic formalities in business are factors that affect firms’ IFRS adoption decisions.