We examine whether the mandated introduction of International Financial Reporting Standards (IFRS) is associated with the propensity to access the public rather than private debt market and the cost of debt. We use a global sample of public bonds and private loans and find that mandatory IFRS adopters are more likely, post-IFRS, to issue bonds than to borrow privately. We also find that mandatory IFRS adopters pay lower bond yield spreads, but not lower loan spreads, after the mandate. These findings are consistent with debt providers responding positively to financial reporting of higher quality and comparability, but only when there is a greater reliance on publicly available financial statements than private communication. Lastly, we document that the observed debt market benefits are concentrated in countries with larger differences between domestic GAAP and IFRS and are present even for EU countries that did not experience concurrent financial reporting enforcement or other institutional reforms. Overall, our study documents positive economic consequences around the mandated IFRS adoption for corporate debt financing and, in particular, for bond financing.Keywords Accounting regulation Á IFRS Á Accounting quality Á Public and private debt markets Á Cost of debt

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We examine whether the credit relevance of financial statements, defined as the ability of accounting numbers to explain credit ratings, is higher after firms are required to report under International Financial Reporting Standards (IFRS). We find an improvement in credit relevance for firms in seventeen countries after mandatory IFRS reporting is introduced in 2005; this increase is higher than that reported for a matched sample of US firms. The increase in credit relevance is particularly pronounced for higher risk speculative-grade issuers, where accounting information is predicted to be more important; and for IFRS adopters with large first-time reconciliations, where the impact of IFRS is expected to be greater. These tests provide reassurance that the overall enhancement in estimated credit relevance is driven by accounting changes related to IFRS adoption. Our results suggest that credit rating analysts' views of economic fundamentals are more closely aligned with IFRS numbers, and that analysts anticipate at least some of the effects of the IFRS transition.

The rapidly increasing worldwide focus on corporate governance has resulted in a proliferation of rating systems that proxy for governance quality. This study develops a governance rating for Greek listed companies by benchmarking their governance structures against three levels: (a) the minimum requirements under Greek regulation (lower level); (b) the incremental recommendations of the Greek code (middle level); and (c) the additional international best practices, prescribed by the UK Combined Code (higher level). Using available data on 274 out of 340 Greek listed companies in 2003 and based on information collected primarily from annual reports, we find that the average governance rating at the lower level is 65.5 per cent; this scoring reduces significantly as we move to the middle and higher level. The average governance rating is 44 per cent. Second, governance scores increase with firm size. Although there may be good reasons explaining these patterns, we find that Greek companies do not provide explanations, i.e. do not practice the "comply or explain" recommendation. Third, our middle level aggregate governance rating is much lower than that reported by prior research that uses a different data gathering and weighting approach. This divergence has important methodological implications. Finally, we document a relatively high lack of transparency in relation to Greek governance practices. This is a sign of "bad governance". Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

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