The impact of IFRS adoption on stock market development andperformance

International Financial Reporting Standards (IFRS) have gained critical importance by providing a common reporting language across countries, thereby reducing information asymmetry and enhancing the efficiency of capital markets. This study examines the effect of IFRS on stock market development and performance using a panel dataset of 59 countries over 2004–2019—the period for which the indicators provide the most recent coverage. Stock market development is proxied by four indicators—market capitalization (LNMCAP), turnover ratio (STURN), total value of shares traded (STRADE), and stock market return (SMR)—with a separate model estimated for each. This study employs the Dynamic Common Correlated Effects (DCCE) estimator, a modern dynamic panel approach that explicitly accounts for cross-country common shocks and slope heterogeneity. The empirical findings indicate that the long-run coefficients estimated via DCCE point to negative and statistically significant effects of IFRS adoption on all four indicators. These results suggest that IFRS, particularly through transition costs, limited institutional capacity, and adverse macroeconomic shocks, exerts unfavorable impacts on market size, liquidity, and returns. Methodologically, the study contributes to the literature by producing long-run estimates that jointly accommodate common shocks and heterogeneity using the DCCE framework, by relying on a broad and up-to-date cross-country dataset, and by evaluating stock market development with a multidimensional set of indicators.