In line with prior literature (Ramanna and Sletten 2009), we also hypothesise that in countries
where the quality of governance institutions is relatively high, adoption of IFRS for SMEs is
likely to be less attractive due to high switching and negotiation costs. Our evidence is consistent
with this view. We also predict that countries with a common law accounting system are more
likely to switch to IFRS for SMEs, as the IASB’s framework is fairly similar to the accounting
tradition of common law countries (Hope et al. 2006, Ramanna and Sletten 2009, Johnson
2011). While prior studies cannot provide statistical evidence that the variable of the legal
origin is an important determinant of countries’ adoption of full IFRS (Hope et al. 2006), we
do find statistically significant results, suggesting that regulatory forces are more prevalent
when countries consider adoption of IFRS for SMEs for single accounts.