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

2015 ◽  
Vol 14 (2) ◽  
pp. 83-87
Author(s):  
Steve Lin
Keyword(s):  
Information Asymmetry ◽  
Financial Reporting ◽  
Research Question ◽  
Bank Loan ◽  
Global Markets ◽  
Ifrs Adoption ◽  
Loan Contracting ◽  
Trade Offs

ABSTRACT This discussion is written for “The Effect of Financial Reporting on Bank Loan Contracting in Global Markets: Evidence from Mandatory IFRS Adoption” by Chen, Chin, Wang, and Yao (2015). I begin with the research question and a brief summary of the main findings of this study and subsequently discuss the strengths and some potential limitations of the study. This study seeks to contribute to the literature by investigating the effect of mandatory IFRS adoption in 18 countries on price and non-price contract terms. The evidence provided in this study suggests that mandatory IFRS adoption increases information asymmetry between firms and loan providers, which leads to trade-offs between contract terms.

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.

scholarly journals The effect of the level of indebtedness on the earnings information content stemming from the mandatory IFRS adoption

2016 ◽  
Vol 4 (1) ◽  
pp. 12
Author(s):  
Hela Turki ◽  
Senda Wali ◽  
Younes Boujelbene
Keyword(s):  
Information Asymmetry ◽  
Information Content ◽  
Financial Reporting ◽  
Forecast Error ◽  
Financial Analysts ◽  
Forecast Dispersion ◽  
Earnings Information ◽  
Ifrs Adoption ◽  
High Level ◽  
The Impact

<p>This paper examines the impact of IFRS / IAS (International Financial Reporting Standards / International Accounting Standards) mandatory adoption on the earning's information content apprehended by the level of information asymmetry and whether this impact differs from one company to another with regard to its level of indebtedness. The information asymmetry is measured by the properties of financial analysts’ forecasts (error and dispersion).This study is conducted over 11 years from 2002 to 2012 by taking as a sample all the companies that belong to the CAC all tradable indexes. The results show a significant effect of these international's standards on financial analysts' forecasts, which stress informational content improvement. In addition, high level of indebtedness associated with IFRS adoption reduces forecast dispersion. By contrast, low level of indebtedness associated with IFRS adoption reduces forecast error.</p>

The Effect of Mandatory IFRS Adoption on Bank Loan Contracting

2012 ◽  
Author(s):  
Tai-Yuan Chen ◽  
Chen-lung Chin ◽  
Shiheng Wang ◽  
Chun Yao
Keyword(s):  
Bank Loan ◽  
Ifrs Adoption ◽  
Loan Contracting

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.

Market Reaction to the Adoption of IFRS in Europe

2010 ◽  
Vol 85 (1) ◽  
pp. 31-61 ◽  
Author(s):  
Christopher S. Armstrong ◽  
Mary E. Barth ◽  
Alan D. Jagolinzer ◽  
Edward J. Riedl
Keyword(s):  
Information Asymmetry ◽  
Positive Reaction ◽  
Financial Reporting ◽  
Information Quality ◽  
Reporting Standards ◽  
High Quality ◽  
Market Reactions ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Stock Market Reactions

ABSTRACT: This study examines European stock market reactions to 16 events associated with the adoption of International Financial Reporting Standards (IFRS) in Europe. European IFRS adoption represented a major milestone toward financial reporting convergence yet spurred controversy reaching the highest levels of government. We find an incrementally positive reaction for firms with lower quality pre-adoption information, which is more pronounced for banks, and with higher pre-adoption information asymmetry, consistent with investors expecting net information quality benefits from IFRS adoption. We find an incrementally negative reaction for firms domiciled in code law countries, consistent with investors' concerns over enforcement of IFRS in those countries. Finally, we find a positive reaction to IFRS adoption events for firms with high-quality pre-adoption information, consistent with investors expecting net convergence benefits from IFRS adoption.

scholarly journals Financial reporting quality in large energy & mining companies: A Canadian case

2015 ◽  
Vol 12 (3) ◽  
pp. 428-440
Author(s):  
Yusuf Mohammed Nulla
Keyword(s):  
Financial Reporting ◽  
Quantitative Research ◽  
Earnings Quality ◽  
Research Question ◽  
Market Price ◽  
Reporting Quality ◽  
Cash Flows ◽  
Income Smoothing ◽  
Mining Companies ◽  
Ifrs Adoption

This paper primarily examines the effect of the mandatory IFRS adoption in Canada by the Canadian energy companies. It is a comparative study between the Canadian GAAP and IFRS from 2008 to 2012. Since this research is an empirical study, the quantitative research method is applied. The research question for this research study is: Does IFRS adoption in the Canadian energy and mining companies improve accounting quality?. This research finds that earnings quality has increased due to the lower volatility between earnings and market price; enhance predictability in the cash flows and financial forecasting (cash related); and stronger influence of earnings to shareholder value. However, it also finds that earnings quality has reduced due to lower persistency and predictability; and less accruals and timeliness loss of recognition (increase in income smoothing).

scholarly journals EFFECT OF INTERNATIONAL FINANCIAL REPORTING STANDARD ON CORPORATE PERFORMANCE OF SELECTED BANKS LISTED ON NIGERIA STOCK EXCHANGE

10.26458/1813 ◽  
2018 ◽  
Vol 18 (1) ◽  
pp. 77-104
Author(s):  
J. N. ELOSIUBA ◽  
Emma OKOYE
Keyword(s):  
Financial Reporting ◽  
Professional Training ◽  
Stock Exchange ◽  
Research Question ◽  
Market Value ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Mean Values ◽  
Ifrs Adoption ◽  
Price Earnings Ratio

In the light of globalisation where foreign investment has become trendy, comparability of financial reports of Nigerian firms and those of other firms across the world has become a concern. Nigerian firms has been mandated to adopt the International Financial Reporting Standard (IFRS) is their financial reporting.  This study has examined the effect of the IFRS adoption on the reported performance of Nigerian banks listed on the Nigerian Stock Exchange. Eight (8) out of the fourteen (14) quoted banks were selected for the study. Four indices of performance employed in the study are profitability using the Return on Equity, Liquidity using total deposit to total loan, loan grants and then market value measured by Price earnings ratio for the period (2011 and 2012). 2011 represented GAAP era while 2012 stands for IFRS adoption. A comparability index for the banks were computed using the Excel Spreadsheet for each of the banks on each variable. Then the One Sample Test was employed for the analyses. The mean was used to answer the research question while the t-statistics tested the hypotheses. The results showed that mean values for profitability, liquidity and market value are greater in the GAAP era (2011) than in the IFRS period (2012), while loan grant has higher for IFRS period (2012). The t-tested indicated none of the variables had significant effect.  Thus the study concluded that IFRS adopted does not have significant effect on bank performance reported in 2011 and 2012. The use of IFRS for all firms as well as incorporation of IFRS guideline in professional training are recommended by this study.

Social Media Sentiment and Bank Loan Contracting

2018 ◽  
Vol 03 (01) ◽  
pp. 1850007 ◽  
Author(s):  
Dazhi Chong ◽  
Ling Li ◽  
Harris Wu ◽  
Jong Park ◽  
Hui Shi ◽  
...  
Keyword(s):  
Social Media ◽  
Information Asymmetry ◽  
Information Dissemination ◽  
Public Information ◽  
Bank Loans ◽  
Bank Loan ◽  
Loan Contracts ◽  
Loan Contracting ◽  
Bank Loan Contracts ◽  
Media Sentiment

This study analyzes how social media affects bank loan contracting. Using a sample of 642 US bank loan contracts, we hypothesize that social media can enhance information dissemination and mitigate the information asymmetry between borrowers and lenders. Consistent with this hypothesis, we find that borrowers that receive positive social media user opinion on social media enjoy more favorable price of bank loan contracts. Additional analyses indicate that the relations among social media user opinion and bank loan price vary with the firm size, loan structure and availability of public information of borrowers. Overall, this research provides evidence that social media reduces cost of bank loans by decreasing information asymmetry between borrowers and lenders in the capital markets.

Discretionary Accruals in Italian Private Firms and Non-Linear Bank Loan Granting

2017 ◽  
pp. 83-99
Author(s):  
Elisabetta Mafrolla ◽  
Viola Nobili
Keyword(s):  
Financial Reporting ◽  
Banking System ◽  
Regulatory System ◽  
Discretionary Accruals ◽  
Bank Loans ◽  
Bank Loan ◽  
Banking Union ◽  
Private Firms ◽  
European Banking Union

This paper investigates whether and at what extent private firms reduce the quality of their accruals in order to signal a better portrait to the bank and obtain new or larger bank loans. We measure earnings discretionary accruals of a sample of Italian private firms, testing whether new and larger bank loans are associated with a higher (lower) quality of earnings in borrowers' financial reporting. We study bank loan levels and changes and how they impact discretionary accruals and found that, surprisingly, private firms' discretionary accruals are systematically positively affected by an increase in bank loans, although they are negatively affected by the credit worthiness rating assigned to the borrowers. We find that the monitoring role of the banking system with regard to the adoption of discretionary accruals is effective only when the loan is very large. This paper may have implications for policy-makers as it contributes to the understanding of the shortcomings of the banking regulatory system. This is an extremely relevant issue since the excessive amount of non-performing loans held by Italian banks recently threatened the stability of the European Banking Union as a whole.

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