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Do financial statement adjustments matter in credit analysis? Evidence from the global telecommunications industry

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dc.contributor Aalto University en
dc.contributor Aalto-yliopisto fi
dc.contributor.author Savolainen, Mari
dc.date.accessioned 2011-11-14T11:23:24Z
dc.date.available 2011-11-14T11:23:24Z
dc.date.issued 2009
dc.identifier.uri https://aaltodoc.aalto.fi/handle/123456789/354
dc.description.abstract This thesis investigates whether financial statement adjustments made during the rating process matter in credit analysis. Firstly, the thesis investigates whether reporting standards and company-specific factors are associated with financial statement adjustments. Secondly, the thesis examines whether financial statement adjustments are associated with actual credit ratings. The data used in the analyses is provided by one of the largest credit rating agencies, referred to as Credit Rating Agency X. The main data consists of the time period 2004-2007, including 196 companies reporting under US GAAP, IFRS and local GAAPs. Moreover, the IFRS companies included in the main data are analyzed more thoroughly in terms of the adjustment type, using the second set of data from year 2007. The data only includes companies active in the telecommunications industry. The first part of the empirical analyses aims at explaining financial statement adjustments using a linear regression method. The second part, on the other hand, includes credit rating models estimated also with a linear regression method. The adjustment variables are added one at a time in the rating models in order to investigate the association between financial statement adjustments and ratings. In an additional test, the explanatory powers resulting from reported and adjusted data are compared. First, the evidence suggests that capital intensity, operative risk and leverage are important in explaining financial statement adjustments. Additionally, public companies face fewer adjustments relative to private companies. The ultimate underlying reason for financial statement adjustments seems to be company-specific decisions concerning financing and capital structure as well as contractual matters. Second, the evidence demonstrates that, without any adjustments, credit ratings are higher for companies reporting under IFRS relative to companies reporting under US GAAP. However, adjustments increase ratings for US companies. On the other hand, local GAAP adjustments decrease rating relative to US GAAP. The results indicate that financial statement adjustments do matter in credit analysis. en
dc.format.extent 123
dc.format.mimetype application/pdf en
dc.language.iso en en
dc.title Do financial statement adjustments matter in credit analysis? Evidence from the global telecommunications industry en
dc.type G2 Pro gradu, diplomityö fi
dc.contributor.school Kauppakorkeakoulu fi
dc.contributor.school School of Economics en
dc.contributor.department Department of Accounting and Finance en
dc.contributor.department Laskentatoimen ja rahoituksen laitos fi
dc.subject.keyword financial statement adjustments
dc.subject.keyword quality of financial statement information
dc.subject.keyword credit rating
dc.subject.keyword reporting standard
dc.identifier.urn URN:NBN:fi:aalto-201111181266
dc.type.dcmitype text en
dc.programme.major Accounting en
dc.programme.major Laskentatoimi fi
dc.type.ontasot Master's thesis en
dc.type.ontasot Pro gradu tutkielma fi
dc.subject.helecon laskentatoimi
dc.subject.helecon accounting
dc.subject.helecon tilinpäätös
dc.subject.helecon balances of books
dc.subject.helecon standardit
dc.subject.helecon standards
dc.subject.helecon teleoperaattorit
dc.subject.helecon telecommunications industry
dc.ethesisid 12222
dc.date.dateaccepted 2010-01-13
dc.location P1 I
local.aalto.openaccess yes
local.aalto.idthes 12222

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