Widespread adoption of IFRS has fueled debate about whether its dominance puts U.S. firms at a competitive disadvantage in attracting global investors. We examine this issue by looking at the change in foreign mutual fund investment in U.S. companies after 2005, the year in which IFRS surpassed U.S. GAAP as the world's most commonly used accounting standard. We find that while foreign investment in U.S. companies is essentially flat over our sample period, it declines relative to foreign investment in EU IFRS adopters. Foreign investment also declines in U.S. companies that experience large increases in IFRS industry peers relative to U.S. companies that experience small increases. In addition, the relative decline is concentrated among mutual funds that do not specialize in U.S. stocks, and is greater for smaller U.S. firms. Overall, our results suggest that the worldwide adoption of IFRS reduces U.S. firms' relative attractiveness to foreign investors.
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