Does a Change in an Accounting Standard Affect the Risk-Pricing of a Firm?

Itay Kedmi ()
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Itay Kedmi: Bank of Israel

No 2021.13, Bank of Israel Working Papers from Bank of Israel

Abstract: In 2016, a new accounting standard for Leases (IFRS 16) was issued, which substantially changes the accounting treatment of operating leases. As a result, financial ratios of firms might change dramatically, especially the leverage ratio. Using the difference-in-differences approach, this paper examines the impact of the disclosure regarding this standard, and its implementation, on the risk-pricing of firms, as measured by the yield spreads of their bonds. The results indicate that the yield spreads of the treated firms rise in the first disclosure date, compared to the control group. Thereafter, in the implementation date, there is no impact. The results are stronger in firms that are expected to violate financial covenants following the new standard

Pages: 44 pages
Date: 2021-08
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-ore and nep-rmg
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https://boiwebrepec.azurefd.net/RePEc/boi/wpaper/WP_2021.13.pdf First version, 2021 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:boi:wpaper:2021.13

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