Has Adoption of IFRS Increased Non–North American Institutional Investment in the Canadian Stock Markets?

We investigate whether non–North American (non-NA) institutional investment in firms listed on the Canadian stock markets increased between the pre- and post-IFRS adoption periods relative to such investment in firms listed on the U.S. stock markets. Prior to IFRS adoption, Canada had high-quality financial reporting standards that were similar to the U.S. standards. As consequences of IFRS adoption, Canadian financial statements became more comparable with European and other IFRS country financial statements and less comparable with neighboring U.S. financial statements. Thus, a question of interest is whether the enhanced comparability with non-NA companies was beneficial in terms of attracting non-NA investment to Canadian companies versus U.S. companies. We find that there was no significant change in non-NA institutional investment in Canadian firms relative to U.S. firms for the very largest (fifth quintile) and for smaller (first, second, and third quintiles) Canadian companies. However, intermediate-sized Canadian companies in the fourth size quintile lost non-NA institutional investment relative to their U.S. peer companies, suggesting that non-NA investors cared more about comparability with U.S. peer companies than non-NA peer companies for companies in this size quintile.