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Capital Flows Sensitivity to Global Financial Shocks in Latin America: the Role of Accounting Harmonization

January 24 @ 1:00 pm - 2:00 pm

Join us for a talk with guest speaker Veronica Santana, Ph.D. Candidate in the University of Sao Paulo and Visiting Scholar at ILAS.

This is part of the Brazil Research Seminar Series 

This research aims to investigate how the adoption of the International Financial Reporting Standards (IFRS) interacts with the sensitivity of capital flows to global financial shocks in Latin America. Global capital flows suffered a large retrenchment after the 2008 financial crisis. However, this trend was much shorter lived in emerging economies, when foreign investors sought higher returns (Bussière & Phylaktis, 2016). Nevertheless, since 2010, net inflows to emerging economies have slowed, but volatility has increased, specially through foreign portfolio holdings (Ahmed & Zlate, 2014) as well as their sensitivity to global financial shocks (Adler et al., 2016).

Along with this uncommon movement of capital flows documented in the last decades, several countries in Latin America started their process to adopt IFRS so that, since 2000, 14 Latin American countries became IFRS adopters. The accounting literature brought evidence of IFRS facilitating cross-border investments, but how it may influence the sensitivity, rather than the volume, of such flows remains an unexplored issue.

Two different effects associated with the adoption of the international standards may occur. First, there is some evidence that IFRS adopters have more integrated markets (e.g., Cai & Wong, 2010), which could increase their sensitivity to global shocks. On the other hand, IFRS is believed to decrease home bias, so that foreign investors may be less willing to retrench from countries during recessions. However, such effects may not take place at all, since the literature is often skeptic on the effects of IFRS adoption for emerging economies (see, e.g., Daske et al., 2008; Li, 2010). Therefore, investigation on the interaction between capital flows sensitivity to global shocks and IFRS in emerging markets is made necessary.

 

 

Details

Date:
January 24
Time:
1:00 pm - 2:00 pm

Venue

802 International Affairs Building
420W 118th Street
New York, NY 10027 United States
+ Google Map
Phone:
212-854-4643
Website:
ilas.columbia.edu