This study investigates whether the cost of capital of Korean listed firms was substantially reduced after the IFRS adoption in long-term aspect and which firms listed in KOSPI or KOSDAQ market had been more enjoyed the benefit. Prior studies related to this subject don’t provided consistent results and have limitations of insufficiency of research periods and generalization problem. Therefore, this study analyzes the positive effect of the IFRS adoption in Korea using long-term based approach and differential measurements (CAPM and WACC) to facilitate generalization. Results of the study found that the cost of capital of Korean listed firms had been significantly reduced during 5 years after the IFRS adoption. In addition, the cost of capital of KOSPI listed firms was reduced more than KOSDAQ listed firms. The results provide meaningful implications to evaluate the effects of IFRS adoption on the cost of capital and to assess accomplishment of fundamental purpose of the IFRS adoption in Korea.

This study investigates whether the value relevance of accounting information was changed after IFRS adoption in South Korea. Related prior studies have found mixed empirical evidence depending on research methodologies or research periods. Moreover, the effect of IFRS adoption on value relevance can be different between Korean stock markets (KSE and KOSDAQ) because they have different characteristics. Also, the main financial statements reported by Korean firms had changed from individual financial statements to consolidated financial statements after IFRS adoption. Thus, this study analyzes the effect of IFRS adoption on the value relevance of individual and consolidated accounting numbers expanding research periods (5 years before and after IFRS adoption) and comparing changes in explanatory powers of Ohlson (1995) model on each listing market. The empirical results indicate that the value relevance of Korean listed firms generally decreased after IFRS adoption. However, the value relevance of KSE listed firms decreased, while the value relevance of KOSDAQ listed firms increased after IFRS adoption. In addition, it was found that the effects of IFRS adoption on value relevance of individual and consolidated financial information were different depending on listed markets. This implies that different level of demand for information environment may induce differential effects of IFRS adoption on value relevance.

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