The economic and regulatory consequences of IFRS 16 adoption on firm investment efficiency: Evidence from ASEAN-5 countries

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

This study examines the impact of the International Financial Reporting Standard No. 16 (IFRS 16) adoption on firm investment efficiency, with emphasis on its economic and regulatory implications for different firm characteristics. A difference-in-differences (DiD) estimation approach served to evaluate data from the Association of Southeast Asian Nations 5 (ASEAN-5) countries (Indonesia, Malaysia, Singapore, Thailand, and the Philippines), with a focus on lease-intensive firms, those with higher learning opportunities, and financially constrained ones. The results indicated that IFRS 16 significantly undermined firm investment efficiency, specifically among lease-intensive firms, those with greater learning opportunities, and financially constrained ones. The mandatory capitalisation requirement, consistent with prior findings on IFRS 16 adoption (Lau, 2023; Utami et al., 2024), was found to influence firm investment decisions via learning and contracting channels. With debt overhang playing a strong mediating role, underinvestment significantly and negatively influenced IFRS 16 adoption. The novelty of this study lies in its documentation of the ex-post economic and regulatory consequences of IFRS 16 adoption on firm investment efficiency and behaviour. Policymakers, standard setters, and practitioners in emerging nations can be better informed on how lease accounting reforms impact investment decisions.

Keywords: IFRS 16 Leases, Economic and Regulatory Consequences, Investment Efficiency, ASEAN

Authors’ individual contribution: Conceptualization — K.W.T.; Methodology — K.W.T.; Validation — K.W.T.; Formal Analysis — K.W.T.; Investigation — K.W.T.; Resources — K.W.T. and M.F.W.; Data Curation — K.W.T.; Writing — Original Draft — K.W.T.; Writing — Review & Editing — K.W.T. and M.F.W.; Visualization — K.W.T. and M.F.W.; Supervision — M.F.W.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G31, M41

Received: 10.07.2025
Revised: 19.11.2025; 15.12.2025
Accepted: 02.01.2026
Published online: 05.01.2026

How to cite this paper: Tan, K. W., & Wong, M. F. (2026). The economic and regulatory consequences of IFRS 16 adoption on firm investment efficiency: Evidence from ASEAN-5 countries. Risk Governance and Control: Financial Markets & Institutions, 16(1), 20–31. https://doi.org/10.22495/rgcv16i1p2