Abstract

https://ssrn.com/abstract=2304956
 
 

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Contracting on GAAP Changes: Large Sample Evidence


Hans Bonde Christensen


University of Chicago - Booth School of Business

Valeri V. Nikolaev


University of Chicago Booth School of Business

August 23, 2016

Chicago Booth Research Paper No. 13-66

Abstract:     
We explore revealed preferences for including versus excluding the changes to GAAP in credit agreements issued by U.S. publicly traded firms over the period from 1994 to 2012. We document a significant time-trend towards excluding GAAP changes from debt contracts. This trend has a positive association with proxies for the standard setters’ shift in focus towards relevance and international accounting harmonization. Borrowers facing higher uncertainty are more likely to write contracts that include GAAP changes, but this group of firms shows a more pronounced trend towards excluding GAAP changes. The evidence is broadly consistent with GAAP changes playing an efficiency role in debt markets. However, changes in the standard setters’ focus can, in part, explain the reduction in this role over the past two decades.

Number of Pages in PDF File: 39

Keywords: Standard setting, GAAP changes, debt contracting, incomplete contract theory

JEL Classification: M4, G32


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Date posted: August 2, 2013 ; Last revised: October 4, 2016

Suggested Citation

Christensen, Hans Bonde and Nikolaev , Valeri V., Contracting on GAAP Changes: Large Sample Evidence (August 23, 2016). Chicago Booth Research Paper No. 13-66. Available at SSRN: https://ssrn.com/abstract=2304956 or http://dx.doi.org/10.2139/ssrn.2304956

Contact Information

Hans Bonde Christensen
University of Chicago - Booth School of Business ( email )
5807 South Woodlawn Avenue
Chicago, IL 60637
United States

Chicago Booth School of Business Logo

Valeri V. Nikolaev (Contact Author)
University of Chicago Booth School of Business ( email )
5807 South Woodlawn Avenue
Chicago, IL 60637
United States
HOME PAGE: http://faculty.chicagobooth.edu/valeri.nikolaev/index.html

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