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The cost of debt implications of financial reporting quality among privately owned Swedish SMEs
Halmstad University, School of Business, Engineering and Science, Centre for Innovation, Entrepreneurship and Learning Research (CIEL), Knowledge Entrepreneurship and Enterprise Research (KEEN).
Brunel University, London, United Kingdom.
2012 (English)Conference paper, Presentation (Refereed)
Abstract [en]

Using a unique database and manually collected data we analyse and document accounting choices made by Swedish SMEs between 2005 and 2008. We find that given an option to report under Swedish GAAP or a translation of IFRS (SFASC/IFRS), only 5 firms out of 1,500 opted to do so. Further analysis of choices of picking individual standards of SFASC/IFRS shows no significant difference across Gazelles and Non-Gazelles. Among firms that select individual SFASC/IFRS standards most opt to use the percentage-of-completion method for long-term contracts. We also investigate differences in quality of financial reporting across Gazelles and Non-Gazelles and find that the financial reporting quality is consistently higher among Gazelles compared to Non-Gazelles. Test of cost of debt implications show that creditors find Gazelles’ financial reporting more useful to assess the credit risk resulting in lower cost of debt for this group of firms. Thus, SMEs seem to have little incentive to switch to SFASC/IFRS, which may be an indication of their attitude to future adoption of IFRS for SMEs as well. Furthermore, the results suggest that SMEs with an incentive to produce high quality financial reporting to raise capital, Gazelles, are able to do so using Swedish GAAP. These findings raise the question whether the IFRS for SMEs project is worthwhile.

Place, publisher, year, edition, pages
2012.
Keyword [en]
Private firms, SMEs, Gazelles, fast growing firms, accounting quality, financial reporting, cost of capital, IAS/IFRS
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:hh:diva-19604OAI: oai:DiVA.org:hh-19604DiVA: diva2:552271
Conference
EUFIN 2012, The 8th Workshop on European Financial Reporting, Prague, Czech Republic, 6-7 September, 2012
Available from: 2012-09-13 Created: 2012-09-13 Last updated: 2017-04-27Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf