THE IMPACT OF INTERNATIONAL FINANCIAL REPORTING STANDARDS ON COST OF CAPITAL
This paper discusses empirical research examining the impact of International Financial Reporting Standards (IFRS) on cost of capital. Using a sample of 1.173 observations of publicly listed companies on the Indonesian Stock Exchange for the fiscal year that ends on December 31, 2006 through 2013, this research finds evidence of positive relationship between IFRS implementation and cost of capital. This means that in post adoption period, the cost of capital increase. This result is inconsistent with investor's expectation, in which IFRS implementation will reduce information asymmetry which in turn decreases cost of capital. When analysis is decomposed into per sector's analysis, the results are inconsistent. For some sectors, IFRS adoption does not have impact on the cost of capital, whereas for the others IFRS adoption positively affect the cost of capital. This study provides further evidence on the economic consequence of IFRS implementation on cost of capital using data from emerging market with low level coercion which is Indonesian Capital Market.