Supply and Demand of Accounting Information: The Case of Bank Financing in Russia
35 Pages Posted: 27 Jul 2006
Date Written: July 2006
The article analyzes uses of accounting information in Russia. We assess the reporting behavior in the lending process for a sample of Russian companies in the years 1999 to 2004. We predict that Russian companies manage earnings to avoid losses before a credit was granted to obtain bank financing. Once the credit was granted companies are predicted to manage earnings because of the bank's monitoring activities. By means of univariate and multivariate analysis we are able to attribute the discontinuity around a zero target in the earnings distribution with firms' response to the banks' assessment of accounting performance. This implies that financing considerations affect reporting incentives of Russian companies.
Keywords: earnings management, reporting incentives, bank financing, transition economies
JEL Classification: G21, M41, P21
Suggested Citation: Suggested Citation