When does the Adoption and Use of IFRS increase Foreign Investment?

Extant research suggests that the use of IFRS provides firms an opportunity to reduce information asymmetry and make themselves more attractive to foreign investors. However, Daske et al., (2013) suggest that any benefits of IFRS adoption will accrue only to firms with incentives to provide transparent financial reporting. We thus predict that foreign ownership will be higher in IFRS firms with strong reporting incentives than in IFRS firms with weaker reporting incentives. Using a sample of over 54,000 firm-years from 72 countries during the period 2001 to 2011, we find evidence supporting this hypothesis. Further, a one quartile increase in transparency is associated with a 0.74 % higher level of foreign ownership, which is economically meaningful compared to a mean level of foreign ownership of 8.14 % across our sample. Additional tests show that our results are driven by countries with weak investor protection and by investments made by institutional investors

Board Independence and Firm Performance in China

We provide the first comprehensive and robust evidence on the relationship between board independence and firm performance in China. We find that independent directors have an overall positive effect on firm operating performance in China. Our findings are robust to a battery of tests, including endogeneity checks using instrumental variables, the dynamic generalized method of moments estimator, and the difference-in-differences method. The positive relationship between board independence and firm performance is stronger in government-controlled firms and in firms with lower information acquisition costs. We also document that Chinese independent directors play an important role in constraining insider self-dealing and improving investment efficiency