IFRS Adoption by UK Unlisted Firms: Subsidiary- Versus Group-Level Incentives

We examine the subsidiary- and group-level determinants of IFRS adoption by unlisted UK firms. Many unlisted firms are part of large conglomerate groups. For these firms, decisions about reporting practices are expected to be made at the group-level. Consistent with this hypothesis, we find that subsidiaries adopt IFRS as part of their group’s strategy to improve within group monitoring and raise external debt capital. ROC curve analysis indicates that these incentives are more important than traditional subsidiary-level incentives studied before. Further, we find that adopting subsidiaries benefit from better accounting quality and higher investment efficiency.