Does the adoption of Ind AS affect the performance of firms in India?

What is it about?

The increasing prevalence of IFRS adoption has resulted in enhanced transparency, accounting quality, and comparability of financial information among firms, especially in emerging markets worldwide, including India. Nonetheless, the question of whether the adoption of IFRS has led to improved firm performance persists. To address this question, this study examines the impact of transitioning from India’s GAAP-based accounting standards to IFRS-converged standards (Ind AS) on non-financial firms’ performance from 2013 to 2022. The empirical findings reveal that the convergence of Indian accounting standards with IFRS significantly improves firm performance, as demonstrated by a positive coefficient of 0.0166 for Ind AS in the fixed-effect model. The study also validates the original empirical findings using the return on equity (ROE) measure of firm performance, which yielded a coefficient of 0.0197, further confirming that the adoption of Ind AS leads to an increase in the performance of Indian firms. These results contribute new insights to the existing IFRS literature and have implications for policymakers and managers.

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Photo by Austin Distel on Unsplash

Photo by Austin Distel on Unsplash

Why is it important?

While several studies have shred evidence for the benefits of IFRS implementation empirically, the impact of significant regulatory changes on firm-level performance remains an important and unresolved research question. This is especially relevant in emerging economies like India, which has recently undergone a major accounting reform with the convergence of IFRS. Although the adoption of Ind AS in India has been regarded as a major accounting reform, its effect on firm performance (FP hereafter) is still unclear. Thus, in the facet of inconclusive findings, the present research probes an attempt to answer the question of whether implementing Ind AS improves the performance of firms in India by employing multivariate regression analysis.

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