The Debt-Contracting Value of Accounting Information and Loan Syndicate Structure
AbstractABSTRACT We investigate how both the ownership structure and explicit contractual structure of syndicated loan deals are shaped by the debt-contracting value (DCV) of borrowers' accounting information. DCV captures the inherent ability of firms' accounting numbers to capture credit quality deterioration in a timely fashion. We hypothesize and document that when a borrower's accounting information possesses higher DCV, information asymmetry between the lead arranger and other syndicate participants is lower, allowing lead arrangers to hold a smaller proportion of new loan deals. Further, we document that the influence of DCV on the proportion of the loan retained is conditional on the lead arranger's reputation, the existence of a credit rating, and the lead arranger's previous relationships with the same borrower. Finally, we find that when loans include performance pricing provisions, the likelihood that the single performance measure used is an accounting ratio, rather than a credit rating, is increasing in DCV. Copyright University of Chicago on behalf of the Institute of Professional Accounting, 2008.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Accounting Research.
Volume (Year): 46 (2008)
Issue (Month): 2 (05)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0021-8456
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- Francis, Bill & Hasan, Iftekhar & Wu, Qiang, 2011. "The impact of CFO gender on bank loan contracting," Research Discussion Papers 18/2011, Bank of Finland.
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- Takuya Iwasaki & Shota Otomasa & Atsushi Shiiba & Akinobu Shuto, 2012. "Excess Executive Compensation and the Demand for Accounting Conservatism," Discussion Paper Series DP2012-08, Research Institute for Economics & Business Administration, Kobe University.
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