Abstract

http://ssrn.com/abstract=1905701
 
 

Citations (5)



 


 



Creditor Control Rights, State of Nature Verification, and Financial Reporting Conservatism


Liang Tan


George Washington University - Department of Accountancy

June 1, 2010

Journal of Accounting & Economics (JAE), Forthcoming

Abstract:     
I examine the impact of state-contingent allocation of creditor control rights on financial reporting. Using a discontinuity analysis, I find that firms’ financial reporting becomes more conservative immediately after covenant violations and this effect persists for at least eight quarters. The conservatism effect is more pronounced when creditors possess greater bargaining power, when firms’ operations are more volatile, and when creditors put Chief Restructuring Officers in place. My findings identify a specific channel through which debt financing shapes corporate financial reporting and provide direct evidence supporting the debt contracting explanation for conservatism posited in Watts (2003).

Number of Pages in PDF File: 58

Keywords: Accounting Conservatism, Covenant Violation, Debt Contracting, Control Rights

JEL Classification: D83, G32, M41

Accepted Paper Series


Download This Paper

Date posted: August 5, 2011 ; Last revised: August 6, 2012

Suggested Citation

Tan, Liang, Creditor Control Rights, State of Nature Verification, and Financial Reporting Conservatism (June 1, 2010). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1905701 or http://dx.doi.org/10.2139/ssrn.1905701

Contact Information

Liang Tan (Contact Author)
George Washington University - Department of Accountancy ( email )
School of Business and Public Management
Washington, DC 20052
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,290
Downloads: 286
Download Rank: 57,683
Citations:  5

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.485 seconds