IAS/IFRS Adoption and Debt Contracting: Evidence from the UK

20 Pages Posted: 7 Oct 2008

See all articles by Annita Florou

Annita Florou

Bocconi University

Urska Kosi

Paderborn University; University of Ljubljana - Faculty of Economics

Date Written: October 1, 2008

Abstract

We investigate whether implementation of IAS/IFRS affects the debt contracting. Prior studies have focused primarily on consequences of IAS/IFRS in equity markets, whilst debt financing has not received much attention. We therefore investigate whether companies using IAS/IFRS face more or less favourable debt contracting relative to companies which do not. Analysis of extant literature indicates that answer to this question is ambiguous because of the conflicting arguments presented there. Additionally, debt contracts have multiple contract terms (interest, amount, maturity, covenants, collateral) and the effect of accounting in such setting is not well researched. We conduct a comprehensive study analysing the association between IAS/IFRS adoption and price and non-price terms of bond issues in the UK. Preliminary results offer some support that adoption of IAS/IFRS affects debt contract terms. Findings are consistent with IAS/IFRS adoption reducing the cost of debt but maturity and secured stats are not associated with accounting standards.

Keywords: IAS/IFRS adoption, debt contracting, cost of debt, UK

Suggested Citation

Florou, Annita and Kosi, Urska, IAS/IFRS Adoption and Debt Contracting: Evidence from the UK (October 1, 2008). AAA 2009 Mid-Year International Accounting Section (IAS) Meeting, Available at SSRN: https://ssrn.com/abstract=1276478 or http://dx.doi.org/10.2139/ssrn.1276478

Annita Florou

Bocconi University ( email )

Via Roentgen 1
Milan, 20136
Italy

HOME PAGE: http://faculty.unibocconi.eu/annitaflorou/

Urska Kosi (Contact Author)

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

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