We examine whether cross-border lending in the syndicated loan market is affected by an exogenous change in accounting standards comparability through a natural experiment based on the mandatory adoption of International Financial Reporting Standards (IFRS) across Europe. Existing studies on the economic consequences of IFRS in the debt market do not reveal whether the impact is caused by changes in accounting quality or comparability, and this literature has so far produced mixed findings on the effect of IFRS. We show that foreign banks offer IFRS-reporting corporate borrowers a larger loan share, a lower yield spread, and a longer loan maturity only when the banks are themselves domiciled in countries that mandate IFRS. Our findings imply that it was the improvement of financial statement comparability after international accounting harmonization, rather than the enhancement of accounting quality under IFRS, that reduced the information disadvantage for foreign banks and encouraged cross-border lending after mandatory IFRS adoption.
Journal of Accounting and Public Policy,34(5),520-547