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

Joanna Shuang Wu, Ivy Xiying Zhang

Research output: Contribution to journalArticlepeer-review

16 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 languageEnglish (US)
Pages (from-to)95-128
Number of pages34
JournalJournal of Accounting, Auditing and Finance
Volume29
Issue number2
DOIs
StatePublished - Apr 2014

Keywords

  • Credit markets
  • Credit relevance
  • IFRS
  • Internationally recognized accounting standards

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