An Investigation of the Relationship between Use of International Accounting Standards and Source of Company Finance in Germany

25 Pages Posted: 9 Mar 2013

See all articles by Ann Tarca

Ann Tarca

University of Western Australia

Richard Donald Morris

UNSW Australia Business School, School of Accounting

Melissa Moy

The University of Western Australia - UWA Business School

Multiple version iconThere are 2 versions of this paper

Date Written: March 2013

Abstract

This study examines the relationship between use of international accounting standards and companies’ source of finance. We investigate the proposition contained in Nobes’ (1998) model that postulates outsider companies (those with a higher level of public finance) in weak equity–outsider markets (capital markets where public equity finance is not the dominant source of finance) are more likely to change their type of accounting system from one focused on information for creditors and tax authorities to one that meets the needs of external financiers. We found strong support for Nobes’ model. Using 408 German listed companies at 1999, we observed that companies with more outsider finance (the proportion of shares held by outsiders and the presence of public debt) were more likely to use international standards (U.S. GAAP or IAS). The results indicate the importance of controlling for source of finance at the company rather than country level in cross‐country studies investigating the benefits of adoption of international standards.

Keywords: Foreign stock exchange listing, IAS/IFRS, International accounting standards, Outsider debt, Outsider equity, Source of finance company, U.S. GAAP

Suggested Citation

Tarca, Ann and Morris, Richard Donald and Moy, Melissa, An Investigation of the Relationship between Use of International Accounting Standards and Source of Company Finance in Germany (March 2013). Abacus, Vol. 49, Issue 1, pp. 74-98, 2013, Available at SSRN: https://ssrn.com/abstract=2230748 or http://dx.doi.org/10.1111/j.1467-6281.2012.00373.x

Ann Tarca (Contact Author)

University of Western Australia ( email )

Business School
35 Stirling Highway
Crawley WA 6009
Australia
+61 8 6488 3868 (Phone)
+61 8 6488 1047 (Fax)

Richard Donald Morris

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

Melissa Moy

The University of Western Australia - UWA Business School ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

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