Conservatism and Debt

Posted: 23 Jun 2008

See all articles by Anne Beatty

Anne Beatty

Ohio State University (OSU) - Department of Accounting & Management Information Systems

Jeff Jiewei Yu

University of Arizona

Joseph Weber

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: June 22, 2008

Abstract

Despite the unquestionable influence of conservatism, disagreement remains about what economic demands lead to financial reporting conservatism. Research examining lenders' demands for reporting conservatism has been questioned for ignoring conservative contract modifications. We document that these modifications exist but are not ubiquitous. We find contract modifications are more likely when agency costs are higher and litigation, tax and equity demands for conservatism are lower. However, we find a positive association between unexplained reporting conservatism and contract modifications, suggesting contractual modifications alone cannot fulfill lenders' demands for conservatism.

JEL Classification: G21, G32, G34, M41, M44, M45

Suggested Citation

Beatty, Anne L. and Yu, Jeff Jiewei and Weber, Joseph Peter, Conservatism and Debt (June 22, 2008). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1149866

Anne L. Beatty

Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

Jeff Jiewei Yu

University of Arizona ( email )

Department of History
Tucson, AZ 85721
United States
520-621-1273 (Phone)

HOME PAGE: http://https://accounting.eller.arizona.edu/people/jeff-jiewei-yu

Joseph Peter Weber (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States
617-253-4310 (Phone)

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