סמינר במימון חשבונאות

Speaker:       Ron Shalev, Stern School of Business

ABSTRACT:

We analyze a choice that parent firms face under IFRS: whether to account a business combination under a common control (BCUCC) at fair value or at the historical cost, to provide evidence on the effect that fair value choice may have on firms’ ability to issue debt. A BCUCC is a merger of two entities owned by the same parent firm. Although most of BCUCCs do not materially change parent firm’s fundamentals, they can reduce accounting leverage of the parent firm if recorded at fair value. We find that parent firms are more likely record BCUCCs at fair value when their pre-BCUCC leverage is high and when they have net worth covenants on their debt. Using a propensity score to match firms that used fair value to account for a BCUCC with similar firms that did not conduct a BCUCC, we find that the former are more likely to issue new public debt following the BCUCC.

The article is available for download from the Finance-Accounting seminar website:

http://en-recanati.tau.ac.il/Finance-Accounting-Seminars2015a