The Impact of the IFRS on the Debt Contracting Process: A Comparison Between UK and Italy

28 Pages Posted: 22 Jun 2011

See all articles by Nicola Moscariello

Nicola Moscariello

University of Naples II - Dept. of Economics

Michele Pizzo

University of Naples II - Department of Economics

Len Skerratt

Brunel University London - Economics and Finance; Philips College; Kingston University - Business School

Date Written: June 22, 2011

Abstract

This paper analyzes the economic consequences of the accounting harmonization process in two different institutional settings, the UK and Italy. The UK is a common-law country characterized by low ownership concentration, strong outsider legal protection, and a GAAP which is considered to be roughly equivalent in disclosure quality to the IFRS. Italy is a typical European code-law country, characterized by a weak outside investor protection system, and a GAAP significantly different from the IFRS model.

We find that, in the post IFRS period, accounting variables play a larger part in the determination of the cost of debt of Italian companies, enhancing the importance of financial reporting data relative to privately held information about borrowers’ credit ratings. In the UK there is no impact of mandatory adoption of IFRS on the cost of debt of listed companies.

Keywords: Debt Market, Cost of Debt, Accounting Regulation, Accounting Quality, Standard Setting, IAS/IFRS

Suggested Citation

Moscariello, Nicola and Pizzo, Michele and Skerratt, Len, The Impact of the IFRS on the Debt Contracting Process: A Comparison Between UK and Italy (June 22, 2011). Available at SSRN: https://ssrn.com/abstract=1870065 or http://dx.doi.org/10.2139/ssrn.1870065

Nicola Moscariello (Contact Author)

University of Naples II - Dept. of Economics ( email )

C.so Gran Priorato di Malta, 1
Capua - Caserta, IA Caserta 80143
Italy

Michele Pizzo

University of Naples II - Department of Economics ( email )

Via Cintia
Complesso Monte S. Angelo
Naples, Naples 80126
Italy

Len Skerratt

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom

Philips College

Nicosia
Cyprus

Kingston University - Business School

Kingston Hill
Kingston upon Thames
Surrey KT2 7LB
United Kingdom

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