Bruno Ferraz Ferreira
Master's – IFRS adoption and credit ratings: a comparative study of effects on emerging and developed markets
Advisor: Prof. Dr. Lucas A. B. de Campos Barros
Comission: Profs. Drs. Fernando Dal-Ri Murcia, Wilson Toshiro Nakamura and Andrea M. A. Fonseca Minardi
Class: 215, FEA-5
This research aims to find evidence about the effects of IFRS mandatory adoption on credit relevant accounting information. In this context three aspects of interest were analyzed: (1) the capability of accounting numbers to explain credit ratings assigned by the big three credit rating agencies (Moody’s, S&P and Fitch), (2) the difference between emerging and developed markets in terms of informational gains after the mandatory adoption of IFRS, and (3) the identification of national governance aspects that might explain this difference. The analysis was based on credit rating and annual accounting data on 571 companies in 37 countries from 2005 to 2017, resulting in a sample of 4.683 firm-years. Aspects 1 and 2 were tested by comparing ordered probit model’s goodness of fit. The bootstrap method was applied to test the statistical significance of the difference between models. For the third analysis, OLS models were estimated to test the regression coefficients from interactions between IFRS adoption and country governance indicators provided by the World Bank (WGI). The results suggest that IFRS mandatory adoption increased the capability of accounting information to explain credit ratings assigned by rating agencies. Additionally, evidence points out that this effect is greater on average for companies in emerging markets compared to others in developed markets. Regarding the influence of countries institutional characteristics, models indicated a significant relationship between corruption control levels, IFRS mandatory adoption, and capability of accounting data to explain credit ratings. This study supports the relevance of accounting information to assess credit risk, brings new contributions to existing literature about the effects of IFRS adoption, and provides new evidence related to the influence of institutional environment on this relationship.
*Abstract provided by the author