The Granting of Loans by German Banks to SMES Against the Back-Ground of International Financial Reporting
Journal of Applied Accounting Research, Vol. 11, No. 1, pp. 43-57, 2010
Posted: 30 Mar 2010 Last revised: 4 Jun 2010
Date Written: June 9, 2009
Purpose – This paper examines whether the choice of the financial reporting system can influence the credit rating of an enterprise. It aims to argue that SMEs reporting according to IFRS can – in some cases – benefit from better credit conditions in comparison with reporting according to the German Commercial Code (German-GAAP). Therefore the analysis focuses on the perceptions of German banks.
Design/methodology/approach – The study uses the results of a written questionnaire which has been sent to more than 1,500 German banks, which makes it the most comprehensive empirical analysis of the perceptions of German banks concerning the granting of loans.
Findings – The findings show (amongst others) that bank internal ratings can be a motivation for SMEs to change the system of financial reporting from German-GAAP to IFRS. Surprisingly, enterprises can in some cases even expect a “rating bonus” in the pricing of the credit, if they provide an IFRS statement instead of a statement prepared in accordance with German-GAAP.
Research limitations/implications – Due to the rapidly changing accounting environment (concerning IFRS as well as the German Commercial Code) the findings have to be re-examined by future research.
Originality/value - This report draws on the present state of research, complementing it for the first time with representative empirical data from the perspective of the decision makers in German credit institutions.
Keywords: Granting of loans, credit rating, rating advantages, credit conditions, IFRS for SMEs, transition to IFRS, standardization of financial statements
JEL Classification: M40, M41
Suggested Citation: Suggested Citation