The effect of mandatory IFRS adoption on the value of cash: The case of Canada

This paper presents evidence that Canada's 2011 adoption of IFRS improved Canadian firms' access to external financing. We use a matched sample of Canadian and US firms and find that the marginal value of cash decreased significantly in Canadian firms following mandatory IFRS adoption in Canada. The post-IFRS decrease in the marginal value of cash is most evident for firms that have a larger number of similar firms in non-Canadian IFRS regimes. This is consistent with IFRS creating a uniform set of accounting standards that lowers the information costs of cross-border financing. We also find larger IFRS-related decreases in the value of cash for firms with high growth potential and low availability of internal cash.