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The Voluntary Adoption of International Accounting Standards and
Loan Pricing around the World
Jeong - Bon Kim, Concordia University and The Hong Kong Polytechnic University
Judy S.L. Tsui, The Hong Kong Polytechnic University
Cheong H. Yi, The Hong Kong Polytechnic University
ABSTRACT. Using a sample of non-US borrowers from 30 countries over the 1997-2005 period, this paper investigates the effect of the voluntary adoption of International Accounting Standards (IAS) on loan rates charged by lenders in the international loan market. First, we find that the IAS adopters pay significantly lower loan rates than the non-adopters by the magnitude of 13 to 30 basis points after controlling for all other factors, and this loan rate difference between the two groups holds irrespective of whether borrowers come from countries with poor or good protection of creditor rights and property rights. Second, we find that the loan-rate reducing effect of IAS adoption is greater (smaller) for borrowers from countries with relatively poor (good) creditor rights. Our results, taken as a whole, corroborate the claim advanced by proponents of IAS that accounting standards harmonization via IAS may reduce the cost of external financing.
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