scholarly journals The Effects of Financial Reporting on Bank Loan Contracting in Global Markets: Evidence from Mandatory IFRS Adoption

2015 ◽  
Vol 14 (2) ◽  
pp. 45-81 ◽  
Author(s):  
Tai-Yuan Chen ◽  
Chen-Lung Chin ◽  
Shiheng Wang ◽  
Wei-Ren Yao
Keyword(s):  
Interest Rates ◽  
Financial Reporting ◽  
Bank Loans ◽  
Bank Loan ◽  
Accounting Quality ◽  
Firm Level ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Loan Contracting ◽  
The 2008 Financial Crisis

ABSTRACT This study examines the effects of the mandatory adoption of International Financial Reporting Standards (IFRS) on the contract terms of bank loans in a global setting. Using a difference-in-differences design based on 26,474 bank loans in 31 countries during the 2000–2011 period, we find that borrowers who mandatorily adopt IFRS experience an increase in interest rates, a reduction in the use of accounting-based financial covenants, an increase in the likelihood that a loan is collateralized, a reduction in loan maturity, and an increase in the fraction of a loan retained by lead arrangers. These findings are robust to the removal of the 2008 financial crisis from our analysis, as well as to the matching of IFRS and non-IFRS borrowers on various country- and firm-level characteristics. Furthermore, we find that these changes are more pronounced for borrowers with greater financial reporting changes, as well as those with poorer accounting quality after IFRS adoption. JEL Classifications: G15; G21; F34; M41.

Does the Mandatory Adoption of IFRS Improve the Association between Accruals and Cash Flows? Evidence from Accounting Estimates

2018 ◽  
Vol 33 (1) ◽  
pp. 39-59
Author(s):  
Jimmy F. Downes ◽  
Tony Kang ◽  
Sohyung Kim ◽  
Cheol Lee
Keyword(s):  
Financial Reporting ◽  
Cash Flows ◽  
Data Availability ◽  
The European Union ◽  
Accounting Quality ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Accounting Estimates ◽  
Accounting Accruals ◽  
Future Cash Flows

SYNOPSIS We investigate the effect of mandatory International Financial Reporting Standards (IFRS) adoption in the European Union on the association between accounting estimates and future cash flows, a key concept of accounting quality within the International Accounting Standard Board conceptual framework. We find that the predictive value of accounting estimates improves after IFRS adoption. This improvement is largely driven by specific types of accounting estimates, such as accounts receivable, depreciation, and amortization expense. We also find that the improvement is concentrated in countries with larger differences between pre-IFRS domestic GAAP and IFRS. Our findings suggest that IFRS allow managers to exercise their judgment to provide information about future cash flows through the more subjective/judgmental portion of accounting accruals. JEL Classifications: M16; M49; O52. Data Availability: The data used in this study are from public sources identified in the study.

scholarly journals Effects of IFRS adoption on tax avoidance

2017 ◽  
Vol 28 (75) ◽  
pp. 407-424 ◽  
Author(s):  
Renata Nogueira Braga
Keyword(s):  
Financial Reporting ◽  
Tax Avoidance ◽  
Publicly Traded ◽  
Corporate Tax ◽  
Firm Level ◽  
Tax Rate ◽  
Publicly Traded Companies ◽  
Accruals Management ◽  
Financial Reporting Standards ◽  
Ifrs Adoption

ABSTRACT This study investigates the association between mandatory International Financial Reporting Standards (IFRS) adoption and corporate tax avoidance. In this study, tax avoidance is defined as a reduction in the effective corporate income tax rate through tax planning activities, whether these are legal, questionable, or even illegal. Three measures of tax avoidance are used and factors at the country and firm level (that have already been associated with tax avoidance in prior research) are controlled. Using samples that range from 9,389 to 15,423 publicly-traded companies from 35 countries, covering 1999 to 2014, it is found that IFRS adoption is associated with higher levels of corporate tax avoidance, even when the level of book-tax conformity required in the countries and the volume of accruals are controlled, both of which are considered potential determinants of this relationship. Furthermore, the results suggest that after IFRS adoption, firms in higher book-tax conformity environments engage more in tax avoidance than firms in lower book-tax conformity environments. It is also identified that engagement in tax avoidance after IFRS adoption derives not only from accruals management, but also from practices that do not involve accruals. The main conclusion is that companies engage more in tax avoidance after mandatory IFRS adoption.

Accounting quality, governance standards, and syndicated loan contracts

2016 ◽  
Vol 28 (1) ◽  
pp. 2-15 ◽  
Author(s):  
Liang Song ◽  
Joel C Tuoriniemi
Keyword(s):  
Financial Crisis ◽  
Emerging Markets ◽  
Developed Countries ◽  
Bank Loan ◽  
Accounting Quality ◽  
Firm Level ◽  
Content Type ◽  
Loan Contracts ◽  
Loan Contracting ◽  
Syndicated Loan

Purpose – The purpose of this paper is to examine how firms’ accounting quality affects bank loan contracting in seven emerging markets and whether these relationships are affected by borrowers’ governance standards. Design/methodology/approach – The study sample period is 1999-2007 because the syndicated loan market was severely affected by the East Asian financial crisis of 1998 and the US financial crisis of 2008. The final sample includes 719 loan observations for 75 firms in seven emerging markets. Findings – The authors find that syndicated lenders provide loans with more favorable terms such as larger amounts, longer maturity and lower interest spread to borrowers in emerging markets with higher accounting quality. The authors also find that the influences of accounting quality on syndicated loan contracting for borrowers in emerging markets exist only with higher country- and firm-level governance rankings. The results of this paper suggest that lenders place more value on accounting numbers generated by borrowers in emerging markets with stronger internal and country governance frameworks. Originality/value – Overall, this research provides new insights about how accounting quality affects the contract design. Specifically, the extant literature has demonstrated the effects of accounting quality on financial contracts in developed countries (e.g. Bharath et al., 2008). The authors extend this analysis to borrowers in emerging markets and confirm a similar result. Most notably, the authors explore whether the relationship between accounting quality and syndicated loan contracts is influenced by borrowers’ country- and firm-level governance, and find that accounting quality matters only when accompanied by high-quality governance. This research provides new insights about how accounting quality and governance standards affect the terms of borrowing contracts in emerging markets.

scholarly journals The Impact of International Financial Reporting Standards (IFRS) on Accounting Quality in Malaysia

2019 ◽  
Vol 5 (1) ◽  
pp. 93-104
Author(s):  
Ooi Chee Keong ◽  
Lee Siew Pengb ◽  
Lim Wan Lengc
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Stock Exchange ◽  
Accounting Quality ◽  
Kuala Lumpur ◽  
High Quality ◽  
Quality Reporting ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
The Impact

There are two objectives of this study, first,it is to examine and compare the accounting quality in pre-and post-implementations IFRS from the viewpoint of investors. Second ,is to identify the differences in the accounting quality between the shariah compliant and non-shariah compliant companies in pre-and post-implementations of IFRS. Using  2169 firm-year observations from firms listed on the Bursa Kuala Lumpur Stock Exchange over the period of 2008  to 2016, the result shows that the implementation of MFRS have reduced the firms’ earnings management. However, this study provides new arguments that Shariah-complaints firms in Malaysia do not necessary have greater incentives to report high-quality reporting based on the investor perspectives.  Our evidence thus help to explains the different impact on IFRS adoption on accounting quality in Malaysia and shariah complaint compnaies.

scholarly journals Utilidad de la Contabilidad para emprendedores no obligados a llevar contabilidad

2020 ◽  
Vol 4 (8) ◽  
pp. 65-85
Author(s):  
Pablo Domingo Vilela Mera ◽  
◽  
Elizabeth Jacqueline Govea Robinzón ◽  
Gabriela Elizabeth Vilela Govea ◽  
◽  
...  
Keyword(s):  
Interest Rates ◽  
Financial Reporting ◽  
Bank Loans ◽  
Economic Activities ◽  
Registration Method ◽  
Financial Reporting Standards ◽  
Goods And Services ◽  
Low Interest Rates ◽  
Accounting Control ◽  
Economy Globalization

The development of the economy, globalization, and technologies of information and communication influenced accounting science to upgrade their postulates with the International Financial Reporting Standards (IFRS). Those new rules were made to unify the registration method, summarize and inform the companies’ economic operations looking to improve its analysis and interpretation. Due to this, a lot of new businesses were created worldwide as independent jobs because of the few opportunities generated by the automation of the production of goods and services. Most of them were formed as people’s entrepreneurs by using their daily savings, family support, or bank loans with low-interest rates. As consequence of more economic activities, the tax weight also increased and, thereby, better accounting control to determine the amount payable of every operation was required. In Ecuador, the entrepreneurs not required to bookkeeping must have daily control of incomes and expenses to establish their taxes, which is the reason for doing this investigation, mainly because they don’t have the academic studies nor enough profit to afford accountant’s wage. The main purpose of this work was to train them to keep accounting by themselves in which they can control their activities through designing and applicating an easy-to-use generic columnar journal. Keywords: accounting, entrepreneur, business, results.

XBRL Adoption and Bank Loan Contracting: Early Evidence

2017 ◽  
Vol 32 (2) ◽  
pp. 47-69 ◽  
Author(s):  
Gary Chen ◽  
Jeong-Bon Kim ◽  
Jee-Hae Lim ◽  
Jie Zhou
Keyword(s):  
Financial Reporting ◽  
Lower Cost ◽  
Bank Loans ◽  
Bank Loan ◽  
Difference In Differences ◽  
Business Reporting ◽  
Loan Contracting ◽  
Research Designs ◽  
Alternative Research ◽  
Loan Spreads

ABSTRACT We examine how the adoption of the eXtensible Business Reporting Language (XBRL) for financial reporting impacts the pricing of bank loans. Using a sample of loans granted to U.S. borrowers from 2007–2013, we find that the adoption of XBRL is associated with a reduction in loan spreads. We further find that the reduction in loan spreads is greater for borrowers who have information that is inherently costlier to process. Results from a difference-in-differences specification along with other alternative research designs provide similar inferences. Subsequent to XBRL adoption, we further show that loan spreads are lower for firms that use more standardized XBRL tags and greater for those that use more extension elements. Overall, our results are consistent with the view that the XBRL mandate brings about an environment that enables lenders to gather and process information in a timelier manner and at a lower cost. JEL Classifications: M41; K22.

scholarly journals The Impact of International Financial Reporting Standards (IFRS) Adoption on The Accounting Quality of Listed Companies In Kenya

2011 ◽  
Vol 1 (1) ◽  
pp. 212 ◽  
Author(s):  
Erick Rading Outa
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Value Relevance ◽  
Listed Companies ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Accounting Quality ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Timely Loss Recognition

AbstractThis study seeks to establish if the adoption of International Financial Reporting Standards (IFRS) in Kenya has been associated with higher accounting quality for listed companies. The International Accounting Standards Board (IASB), in its objectives and preamble, supposes that the beneficial effects from IFRS adoption include transparency, accounting quality and reduced cost of capital. Based on these assumptions, this study applied accounting quality measures; earnings management, timely loss recognition and value relevance to find out whether the adoption of IFRS has led to improvements in accounting quality in companies listed in Kenya. The methodology is based on prior literature definition of metrics of accounting quality mainly earnings management, timely loss recognition and value relevance. The study differs from the previous ones by overcoming difficulties in controlling for confounding factors faced in previous studies which could have led to less reliable results. Three out of the eight metrics indicated that quality had marginally improved while five indicated that it had marginally declined. These mixed outcomes are very much in line with findings in other studies and the study contributes to the debate by explaining why accounting quality outcomes are still not consistent with IFRS promises in spite of improved test conditions. Key words: IFRS; IAS; accounting quality; earnings management; timely loss recognition;

scholarly journals Does the IFRS Effect Continue? An International Comparison

2018 ◽  
Vol 10 (12) ◽  
pp. 4818 ◽  
Author(s):  
In Hwang ◽  
Kang Hur ◽  
Sun Kang
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Value Relevance ◽  
Investor Protection ◽  
Early Years ◽  
Accounting Quality ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Accounting Measurement ◽  
Early Effects

Previous research showed that in the early years after adoption, the change to International Financial Reporting Standards (IFRS) impacted accounting quality. The purpose of this study is to analyze whether those effects have changed over time in companies within countries that have different legal regimes, enforcement, and degrees of external investor protection. We measure accounting quality using discretionary accruals, real activities manipulation, and the stock price value relevance of earnings per share and book value per share. The findings show that the early effects of IFRS adoption continue with the passage of time in companies listed in countries with common law systems, such as the United Kingdom (UK) and Australia, which provide powerful outside investor protection in capital markets. Yet, the early effects of IFRS adoption do not continue after the passage of time in companies listed in Asian countries with statutory law systems, such as Korea and China, which have low levels of outside investor protection. Moreover, it is difficult to obtain evidence that value relevance has improved after the accounting measurement of corporate value shifted to IFRS. The results show that there are differences in the sustained effects on accounting quality, even after the application of IFRS due to the different social, economic, and cultural characteristics of countries.

Accounting Convergence, Mandatory Adoption of IFRS, and Accounting Quality

2021 ◽  
pp. 605-627
Author(s):  
Sinem Ates
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
Cultural Factors ◽  
Institutional Factors ◽  
Accounting Quality ◽  
Listed Firms ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Legal Enforcement ◽  
Mandatory Adoption

This chapter aims to investigate whether the mandatory adoption of international financial reporting standards (IFRS) leads to an increase in the accounting quality measured by value relevance and the role of the national institutional factors, namely development of the capital market, legal enforcement, cultural factors, legal systems, and book-tax conformity, in the change in value relevance after IFRS adoption. Towards this end, the price and financial data of listed firms from eleven EU countries for 15 years were examined by panel data methods. The results of this study indicate that mandatory adoption of IFRS leads to an increase in the value relevance of EPS however it has not a significant effect on the value relevance of BVPS. It is also found that, among the national institutional factors, legal enforcement, cultural factors, and book-tax conformity have a significant effect on the change in value relevance after IFRS adoption.

scholarly journals Bank earnings smoothing during mandatory IFRS adoption in Nigeria

2019 ◽  
Vol 10 (1) ◽  
pp. 32-47 ◽  
Author(s):  
Peterson K. Ozili ◽  
Erick R. Outa
Keyword(s):  
Financial Reporting ◽  
Income Smoothing ◽  
Accounting Quality ◽  
Loan Loss ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Loan Loss Provisions ◽  
Earnings Smoothing ◽  
Reported Earnings

PurposeThe purpose of this paper is to examine the extent of bank earnings smoothing during mandatory International Financial Reporting Standards (IFRS) adoption in Nigeria, to determine whether mandatory IFRS adoption increased or decreased income smoothing among Nigerian banks.Design/methodology/approachThe authors employ panel regression methodology to estimate the association between loan loss provisions (LLPs) and bank earnings.FindingsThe authorse find that the mandatory adoption of IFRS is associated with lower earnings smoothing among Nigerian banks, which implies that Nigerian banks do not use LLPs to smooth reported earnings during the mandatory IFRS adoption period. The authors find evidence for earnings smoothing via LLP during voluntary IFRS adoption. Earnings smoothing is not significantly associated with listed and non-listed Nigerian banks during voluntary and mandatory IFRS adoption. Overall, the findings indicate that mandatory IFRS adoption improves the informativeness and reliability of LLPs estimate by discouraging Nigerian banks from influencing LLPs for earnings smoothing purposes during the mandatory IFRS adoption. The findings of this paper are relevant to the debate on whether IFRS reporting improves the quality of financial reporting among firms in Nigeria.Practical implicationsOverall, the findings indicate that mandatory IFRS adoption improves the informativeness and reliability of LLPs estimate by discouraging Nigerian banks from influencing LLPs estimates to smooth earnings during the period of mandatory IFRS adoption.Social implicationsThe implication of the study is that IFRS has higher accounting quality than local GAAP in Nigeria as it improves the quality and informativeness of accounting numbers (LLPs and earnings) reported by Nigerian banks during the period examined.Originality/valueThis study is the first attempt to focus on income smoothing during mandatory IFRS adoption in Nigeria.

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