Accounting Conservatism and Long-term Debt Contracts
Accounting Conservatism and Long-term Debt Contracts

Author: Aikaterini Ferentinou

Publisher:

Published: 2018

Total Pages:

ISBN-13:

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The purpose of this thesis is to examine the effect of a number of debt issue characteristics on debt contracting efficiency. After the initiation of a debt contract, inefficiencies can arise due to incomplete contracts and agency costs. I contribute to understanding whether debt maturity, different types of accounting-based (balance-sheet- and income-statement-based) debt covenants, as well as ability of renegotiation can restore efficiency. The research is motivated by the fact that there is an inconsistency in empirical and analytical results regarding the role of conservatism (beneficial or not) in the debt contracting setting. A reason for this inconsistency may well be the consideration of debt maturity. Previous analytical literature studies short-term debt contracts, while inefficiencies in the form of increased agency costs exist in case of longer debt maturity. Furthermore, analytical research does not examine balance-sheet debt covenants, although they also improve debt efficiency. My analytical show that there is a higher level of conservatism, when the long-term debt contracts include balance-sheet rather than income-statement debt covenants. Moreover, a higher level of conservatism is required under long-term than under short-term debt contracts, given that the conflict of interest between the firm and the lender is strong. My empirical findings provide empirical evidence in accordance with my analytical findings, while I also find that long-term (short-term) debt contracts include more (less) balance-sheet than income-statement debt covenants. Finally, I find that when renegotiation is an option, the intensiveness of the conflict of interest, the probability that the project is good, along with the level of renegotiation cost will determine the optimal level of conservatism. As the renegotiation cost increases, the result becomes more liberal, under a moderate conflict of interest and more conservative, under a strong conflict of interest.

Evidence on the Role of Accounting Conservatism in Debt Contracting
Evidence on the Role of Accounting Conservatism in Debt Contracting

Author: Elizabeth Francisca Gutierrez

Publisher:

Published: 2012

Total Pages: 59

ISBN-13:

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I examine how accounting conservatism relates to the design of private debt contracts with consideration of managerial risk preferences embedded in compensation contracts. Theoretical explanations for conservatism relate to the design of financial covenants or valuation of pledged assets in efficiently resolving asset substitution and incentive conflicts, respectively. I also consider conservatism in earnings in conjunction with other devices in signaling credit risk. I find evidence that accounting conservatism, the presence of financial covenants, and collateral are positively associated with the choice of long-term debt; with short-term debt constituting an alternative form of creditor protection. More notably, I find evidence of a predicted positive association between the use of collateral and conservatism. I fail to find a predicted positive association, however, between the presence of financial covenants and conservatism when managerial incentives indicate greater risk of asset substitution. Finally, I find no evidence of an association between conservatism in conjunction with earnings-based covenants and yield spreads as a measure of signaling content.

Accounting and Debt Markets
Accounting and Debt Markets

Author: Mark Clatworthy

Publisher: Taylor & Francis

Published: 2021-05-13

Total Pages: 150

ISBN-13: 1000344606

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Accounting and Debt Markets: Four Pieces on the Role of Accounting Information in Debt Markets provides novel and up-to-date evidence on the role of accounting information in debt markets Companies and organisations worldwide rely heavily on debt markets for short, medium and long-term financing, and debt markets and financial intermediaries have significant effects on the real economy. Accounting information has various functions in debt markets, including inter alia, informing pricing decisions and credit ratings, determining the allocation of creditor control rights and establishing bank capital adequacy requirements. The chapters in this book provide illustrative discussion, analysis and evidence on the importance of accounting information in credit markets. The first of the four pieces reflects on how a conservative financial reporting system helps firms obtain debt funds and with better conditions, and why this is the case. The second examines the effects of accounting disclosure on credit ratings of private companies and shows that accounting information is useful for credit rating agencies. The two final pieces reflect on how banks should account for credit losses, and on how regulators are tackling this issue. The chapters in this book were originally published as a special issue of Accounting and Business Research.

Accounting Conservatism and Firm Growth Financed by External Debt
Accounting Conservatism and Firm Growth Financed by External Debt

Author: Tony Kang

Publisher:

Published: 2015

Total Pages: 45

ISBN-13:

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Previous research shows that accounting conservatism facilitates debt contracting. Extending this line of literature, we examine whether the role of accounting conservatism in accessing external debt to attain firm growth varies with its maturity. We find evidence of a positive relationship between conservatism and debt maturity. We also observe a positive relationship between conservative accounting and future growth funded by all classes of debt, but this relation is due to long-term rather than short-term debt, which is less prone to agency risk. Further, the associations between conservatism and debt maturity and conservatism and growth financed by long-term debt are mostly observed for firms with fewer anti-takeover provisions in place. These findings suggest that the demand for accounting conservatism is not uniform across different debt maturity horizons.

Accounting and Debt Markets
Accounting and Debt Markets

Author: Mark Clatworthy

Publisher: Routledge

Published: 2021-05-13

Total Pages: 196

ISBN-13: 1000344665

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Accounting and Debt Markets: Four Pieces on the Role of Accounting Information in Debt Markets provides novel and up-to-date evidence on the role of accounting information in debt markets Companies and organisations worldwide rely heavily on debt markets for short, medium and long-term financing, and debt markets and financial intermediaries have significant effects on the real economy. Accounting information has various functions in debt markets, including inter alia, informing pricing decisions and credit ratings, determining the allocation of creditor control rights and establishing bank capital adequacy requirements. The chapters in this book provide illustrative discussion, analysis and evidence on the importance of accounting information in credit markets. The first of the four pieces reflects on how a conservative financial reporting system helps firms obtain debt funds and with better conditions, and why this is the case. The second examines the effects of accounting disclosure on credit ratings of private companies and shows that accounting information is useful for credit rating agencies. The two final pieces reflect on how banks should account for credit losses, and on how regulators are tackling this issue. The chapters in this book were originally published as a special issue of Accounting and Business Research.

Empirical Capital Structure
Empirical Capital Structure

Author: Christopher Parsons

Publisher: Now Publishers Inc

Published: 2009

Total Pages: 107

ISBN-13: 160198202X

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Empirical Capital Structure reviews the empirical capital structure literature from both the cross-sectional determinants of capital structure as well as time-series changes.

Artificial Intelligence for Sustainable Finance and Sustainable Technology
Artificial Intelligence for Sustainable Finance and Sustainable Technology

Author: Abdalmuttaleb M. A. Musleh Al-Sartawi

Publisher: Springer Nature

Published: 2022-01-01

Total Pages: 637

ISBN-13: 3030934640

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This book shows latest research on artificial intelligence for sustainable technology. ICGER 2021 was organized by the Accounting, Finance and Banking Department at Ahlia University, Bahrain, and was conducted on the 15th and 16th of September. The strategic partners included the University of Jordan, the Bahrain Economists Society, the Association of Chartered Certified Accountants: ACCA, Al-Barka Banking Group and the International Computer Auditing Education Association: ICAEA . The theme of the ICGER 2021 centered around artificial intelligence for sustainable finance and sustainable technology. Accordingly, the papers presented at the conference provided a holistic view of sustainable finance, sustainability, AI, financial technology, cybersecurity, blockchain, CSR, and governance. This book, unlike ever before, brings together intelligence applications of new technologies and the sustainability requirements in the era of the digital economy, with special attention given to the opportunities, challenges, for education, business growth, and economic progression of nations which will help societies (economists, financial managers, engineers, ICT specialists, digital managers, data managers, policymakers, regulators, researchers, academics, and students) to better understand, use, and control AI applications and financial technologies to develop future strategies and to achieve sustainable development goals.

The Chicago Plan Revisited
The Chicago Plan Revisited

Author: Mr.Jaromir Benes

Publisher: International Monetary Fund

Published: 2012-08-01

Total Pages: 71

ISBN-13: 1475505523

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At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.

The Economics and Politics of Accounting
The Economics and Politics of Accounting

Author: Christian Leuz

Publisher: OUP Oxford

Published: 2005-09-15

Total Pages: 434

ISBN-13: 0191536830

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Accounting and the role of accountants has permeated the modern societies. For the most part we have accepted the impartiality and objectivity of accounting and not recognized how accounting systems are embedded in a country's economic and legal framework, much of which is in turn shaped by political processes. This web of interactions results in complex economic and political questions which require accounting researchers to focus on several related trends: information economics, regulatory economics, sociology, and political science. Although considerable progress has been made in the field of accounting, many fundamental questions are still subject to debate. In this book leading international scholars address a number of important questions: · What is the role of accounting in security valuation, decision making and contracting? · What can we learn from economics-based research in accounting? · What is the role of auditing and how can accounting standards be enforced? · What are the cost and benefits of accounting and disclosure regulation? · What is the role of accounting in society? · How does lobbying affect the political process of standard setting? · What are the consequences of the internationalization of standard setting? This seminal book will be of interest to academics, researchers, and graduate students of Accounting, Finance, Business Studies, Sociology, and Political Economy.