Publication Date

2014

Abstract

This study compares the pricing of credit risk information conveyed by accounting numbers under IFRS relative to local GAAP. We measure the price of credit risk by CDS spreads and focus on three fundamental accounting metrics that inform about credit risk: earnings, leverage and book value equity. Using a difference in differences methodology, we find that while earnings, book value and, to a lesser extent, leverage are significant determinants of credit risk pricing both prior to and after IFRS adoption, the adoption of IFRS did not change the credit risk informativeness of these accounting variables as reflected in CDS spreads. This conclusion is robust to controlling for institutional differences among countries as well as a battery of sensitivity analyses.

Document Type

Article

Keywords

Credit Default Swaps, Credit Risk, IFRS

Disciplines

Accounting | Business

Creative Commons License

Creative Commons Attribution-Noncommercial 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 4.0 License.

Included in

Accounting Commons

Share

COinS