The adoption of internationally recognized accounting standards: Implications for the credit markets

Joanna Shuang Wu; Ivy Xiying Zhang

doi:10.1177/0148558X14524420

The adoption of internationally recognized accounting standards: Implications for the credit markets

Joanna Shuang Wu, Ivy Xiying Zhang

Accounting

Research output: Contribution to journal › Article › peer-review

25 Scopus citations

Abstract

We examine whether the adoption of internationally recognized accounting standards is associated with a greater sensitivity of credit ratings to accounting information. We find that credit ratings are significantly more sensitive to the accounting default factor post voluntary International Financial Reporting Standards (IFRS)/U.S. Generally Accepted Accounting Principle (GAAP) adoption. Similar evidence is also found post mandatory IFRS adoption in countries with strong rules of law. Collectively, the above evidence suggests that firms' incentives to comply are important in determining the consequences of accounting standard changes.

Original language	English (US)
Pages (from-to)	95-128
Number of pages	34
Journal	Journal of Accounting, Auditing and Finance
Volume	29
Issue number	2
DOIs	https://doi.org/10.1177/0148558X14524420
State	Published - Apr 2014

Bibliographical note

Funding Information:
The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Financial support is provided by the Simon School of Business at the University of Rochester and the Carlson School of Management at the University of Minnesota.

Copyright:
Copyright 2014 Elsevier B.V., All rights reserved.

Keywords

Credit markets
Credit relevance
IFRS
Internationally recognized accounting standards

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10.1177/0148558X14524420

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AB - We examine whether the adoption of internationally recognized accounting standards is associated with a greater sensitivity of credit ratings to accounting information. We find that credit ratings are significantly more sensitive to the accounting default factor post voluntary International Financial Reporting Standards (IFRS)/U.S. Generally Accepted Accounting Principle (GAAP) adoption. Similar evidence is also found post mandatory IFRS adoption in countries with strong rules of law. Collectively, the above evidence suggests that firms' incentives to comply are important in determining the consequences of accounting standard changes.

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The adoption of internationally recognized accounting standards: Implications for the credit markets

Abstract

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