 Accounting Quality and Loan Pricing: The Effect of Cross-country Differences in Legal EnforcementThe International Journal of Accounting, 2017, vol. 52, issue 2, 178-200 Abstract: This study examines whether the strength of legal enforcement at the country level plays a role in the value-relevance of accounting quality for loan pricing determination, using an international sample of firms reporting under IFRS. The underlying hypothesis is that stronger vs. weaker enforcement should affect the informativeness of financial statements, due to their increased credibility, and thus results in a stronger influence of accounting quality on loan pricing, in case this information is considered more reliable by potential lenders. Evidence indicates that accounting quality is consequential for the determination of loan spread only in combination with the level of legal enforcement, and this only holds for the countries with stronger legal enforcement. This evidence indicates that financial statement quality information is value-relevant and has a significant impact on the determination of loan pricing only if this information is considered to be credible enough by loan providers in a country, and this is the case when legal enforcement is stronger. Keywords: Accounting quality; IFRS; Legal enforcement; Bank loan terms and conditions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:accoun:v:52:y:2017:i:2:p:178-200 DOI: 10.1016/j.intacc.2016.11.001 Access Statistics for this article The International Journal of Accounting is currently edited by A. R. Abdel-Khalik More articles in The International Journal of Accounting from Elsevier |
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