An Investigation of the Relationship between Use of International Accounting Standards and Source of Company Finance in Germany

42 Pages Posted: 9 Aug 2005 Last revised: 15 Mar 2012

See all articles by Ann Tarca

Ann Tarca

University of Western Australia

Melissa Moy

University of Western Australia

Richard Donald Morris

UNSW Australia Business School, School of Accounting

Multiple version iconThere are 2 versions of this paper

Date Written: January 21, 2012

Abstract

This study examines the relationship between use of international accounting standards and companies’ source of finance. We investigate the proposition contained in Nobes’ (1998) model which postulates outsider companies (those with a higher level of public finance) in weak equity-outsider markets (capital markets where public equity finance is not the dominant source of finance) are more likely to change their type of accounting system from one focused on information for creditors and tax authorities to one that meets the needs of external financiers. We found strong support for Nobes’ model. Using 408 German listed companies at 1999, we observed that companies with more outsider finance (the proportion of shares held by outsiders and the presence of public debt) were more likely to use international standards (US GAAP or IAS). The results indicate the importance of controlling for source of finance at the company rather than country level in cross-country studies investigating the benefits of adoption of international standards.

Keywords: international accounting standards, IAS IFRS, US GAAP, source of company finance, outsider equity, outsider debt, foreign stock exchange listing

JEL Classification: M41, M44, M47, G32

Suggested Citation

Tarca, Ann and Moy, Melissa and Morris, Richard Donald, An Investigation of the Relationship between Use of International Accounting Standards and Source of Company Finance in Germany (January 21, 2012). Available at SSRN: https://ssrn.com/abstract=773807 or http://dx.doi.org/10.2139/ssrn.773807

Ann Tarca (Contact Author)

University of Western Australia ( email )

Business School
35 Stirling Highway
Crawley WA 6009
Australia
+61 8 6488 3868 (Phone)
+61 8 6488 1047 (Fax)

Melissa Moy

University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
AUSTRALIA

Richard Donald Morris

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

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