Analyzing the Impact of IFRS Standards on Default Risk Assessment for Listed Groups: An Exploratory Study of the French Market
Escaffre, Lionel
Analyzing the Impact of IFRS Standards on Default Risk Assessment for Listed Groups: An Exploratory Study of the French Market - 2007.
71
"Under the ""going concern"" principle, an entity is considered a going concern in the absence of information proving the contrary. Over the last thirty years, researchers have extensively examined the information relevant to default risk assessment. These empirical works first adopting accounting-based, and more recently option-pricing-based, approaches have been prolific. However, the 2005 transition from French GAAP towards IFRS framework may have impacted the valuation methodologies previously documented. Using a sample of SBF 120 industrial companies, this study examines the impact of the IFRS transition on default risk assessment as gauged by the main accounting-based (i.e., Altman 1968; Ohlson 1980; and Zmijewski 1984) and option-based models (i.e., Merton 1974 and Vassalou and Xing 2004). Our empirical results suggest that sampled listed firms exhibit on average a significantly lower default risk estimation under IAS than under French GAAPs ceteris paribus. This finding underlines the fact that contrary to reddition-oriented French GAAP, the transition to the prospective-based IFRS necessarily implies a reconsideration of the hypotheses underlying the common default risk models."
Analyzing the Impact of IFRS Standards on Default Risk Assessment for Listed Groups: An Exploratory Study of the French Market - 2007.
71
"Under the ""going concern"" principle, an entity is considered a going concern in the absence of information proving the contrary. Over the last thirty years, researchers have extensively examined the information relevant to default risk assessment. These empirical works first adopting accounting-based, and more recently option-pricing-based, approaches have been prolific. However, the 2005 transition from French GAAP towards IFRS framework may have impacted the valuation methodologies previously documented. Using a sample of SBF 120 industrial companies, this study examines the impact of the IFRS transition on default risk assessment as gauged by the main accounting-based (i.e., Altman 1968; Ohlson 1980; and Zmijewski 1984) and option-based models (i.e., Merton 1974 and Vassalou and Xing 2004). Our empirical results suggest that sampled listed firms exhibit on average a significantly lower default risk estimation under IAS than under French GAAPs ceteris paribus. This finding underlines the fact that contrary to reddition-oriented French GAAP, the transition to the prospective-based IFRS necessarily implies a reconsideration of the hypotheses underlying the common default risk models."
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