Bhat, Gauri, Callen, Jeffrey L. and Segal, Dan (2014) Credit risk and IFRS : the case of credit default swaps. Journal of Accounting, Auditing & Finance, 29 (2). pp. 129-162. doi:10.1177/0148558X14521205 ISSN 0148-558X.

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Abstract

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.

Item Type:	Journal Article
Divisions:	Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School
Journal or Publication Title:	Journal of Accounting, Auditing & Finance
Publisher:	Sage Publications Ltd.
ISSN:	0148-558X
Official Date:	1 April 2014
Dates:	Date Event 1 April 2014 Published 24 February 2014 Available
Volume:	29
Number:	2
Page Range:	pp. 129-162
DOI:	10.1177/0148558X14521205
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access

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