Credit Risk and IFRS: The Case of Credit Default Swaps

• Autores: Gauri Bhat, Jeffrey L. Callen, Dan Segal
• Localización: Journal of Accounting Auditing and Finance, ISSN-e 2160-4061, ISSN 0148-558X, Vol. 29, Nº 2, 2014, págs. 129-162
• Idioma: inglés
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• Resumen

  • This study compares the pricing of credit risk information conveyed by accounting numbers under International Financial Reporting Standards (IFRS) relative to local Generally Accepted Accounting Principles (GAAP). We measure the price of credit risk by credit default swap (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.