The Role of Information and Financial Reporting in Corporate Governance and Debt Contracting

174 Pages Posted: 21 Mar 2010 Last revised: 16 Nov 2011

See all articles by Chris Armstrong

Chris Armstrong

University of Pennsylvania - Accounting Department

Wayne R. Guay

University of Pennsylvania - Accounting Department

Joseph Weber

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

Date Written: September 30, 2010

Abstract

We review recent literature on the role of financial reporting transparency in reducing governance-related agency conflicts among managers, directors, and shareholders, as well as in reducing agency conflicts between shareholders and creditors, and offer researchers some suggested avenues for future research. Key themes include the endogenous nature of debt contracts and governance mechanisms with respect to information asymmetry between contracting parties, the heterogeneous nature of the informational demands of contracting parties, and the heterogeneous nature of the resulting governance and debt contracts. We also emphasize the role of a commitment to financial reporting transparency in facilitating informal multi-period contracts among managers, directors, shareholders, and creditors.

Keywords: financial accounting, corporate governance, board structure, contracting, executive compensation, debt contracts, informal contracts

JEL Classification: G24, M41

Suggested Citation

Armstrong, Chris S. and Guay, Wayne R. and Weber, Joseph Peter, The Role of Information and Financial Reporting in Corporate Governance and Debt Contracting (September 30, 2010). Available at SSRN: https://ssrn.com/abstract=1571138 or http://dx.doi.org/10.2139/ssrn.1571138

Chris S. Armstrong

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Wayne R. Guay (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
1329 Steinberg-Dietrich Hall
Philadelphia, PA 19104-6365
United States
215-898-7775 (Phone)
215-573-2054 (Fax)

Joseph Peter Weber

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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