Abstract

http://ssrn.com/abstract=2147838
 


 



Financial Reporting Regulation and Financing Decisions


Patricia L. Naranjo


Massachusetts Institute of Technology (MIT) - Sloan School of Management

Daniel Saavedra


Massachusetts Institute of Technology (MIT) - Sloan School of Management

Rodrigo S. Verdi


Massachusetts Institute of Technology (MIT)

June 20, 2014


Abstract:     
We study the influence of a major reform in financial reporting regulation – the adoption of the International Financial Reporting Standards (IFRS) – on financing decisions. Across a battery of tests, we find that firms that are required to adopt IFRS are more likely to raise external financing post IFRS. Further, firms use the access to external financing to rebalance their capital structure. Our results are accentuated in countries with stronger institutions and across firms that benefit more from a reduction in adverse selection costs. Our findings highlight the importance of financial reporting regulation in explaining financing policies and provide insights into which firms are more likely to benefit from it.

Number of Pages in PDF File: 56

Keywords: Financial Reporting Regulation, Financing Decisions, Information Asymmetry, Capital Structure, International Accounting, IAS, IFRS

JEL Classification: G15, G30, G32, M41

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Date posted: September 17, 2012 ; Last revised: June 21, 2014

Suggested Citation

Naranjo, Patricia L. and Saavedra, Daniel and Verdi, Rodrigo S., Financial Reporting Regulation and Financing Decisions (June 20, 2014). Available at SSRN: http://ssrn.com/abstract=2147838 or http://dx.doi.org/10.2139/ssrn.2147838

Contact Information

Patricia L. Naranjo
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
100 Main Street
E62-676
Cambridge, MA 02142
United States
Daniel Saavedra
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
77 Massachusetts Ave.
E62-416
Cambridge, MA 02142
United States
Rodrigo S. Verdi (Contact Author)
Massachusetts Institute of Technology (MIT) ( email )
Sloan School of Management
100 Main Street E62-679
Cambridge, MA 02142
United States
(617) 253 2956 (Phone)
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