The Effects of SFAS 141 and 142 Deliberation and Adoption on Loan Spreads

ABSTRACT This study examines the effects of the deliberation and adoption of SFAS 141 and 142 on loan spreads. The deliberation process for guidance may trigger uncertainty and an ultimate adoption leads to revised guidance. Each of these activities can impact capital costs. Using industries with insignificant goodwill as a comparison group, I analyze the changes in loan spreads in industries with significant goodwill and find an increase in loan spreads during the deliberation period of the standards and no change after the adoption. These results contribute to our understanding of the effects of goodwill accounting on credit market participants as well as the contracting effects of the deliberation process.