IFRS Adoption and the Choice Between Public and Private Debt: Evidence from South Korea

ABSTRACT

This article examines the association between mandatory International Financial Reporting Standards (IFRS) adoption and corporate choice between public debt and private debt. If IFRS adoption increases the quality of lenders’ information environment provided on financial statements, firms are more likely to access the public debt market. Using a sample of public and private debts financing firms from 2000 to 2014 in Korea, we find that firms that file financial reports under the IFRS are less likely to finance from public debt markets, implying that the mandatory IFRS adoption has exacerbated the information environment of the public debt market in Korea.

KEY WORDS:

• IFRS
• information environment
• debt financing

Acknowledgments

We are thankful to the Ali Kutan (editor) and anonymous referees for helpful comments and suggestions.

Notes

1. Since this sample may have a sample selection bias because it has a pre-IFRS sample for 10 years (2000–2010) and a post-IFRS sample for 4 years (2011–2014). Therefore we will reaffirm the impact of IFRS on public debt preferences by limiting the pre-IFRS and post-IFRS periods to 2008–2014 for the periods to be identical.