The contracting benefits of accounting conservatism to lenders and borrowers
Name
65192813-MIT.pdf
Description
Full printable version
Size
4.28 MB
Format
Adobe PDF
Checksum (MD5)
ba9541aa1009698d5ae26c294f498b61
Author(s)
Zhang, Jieying, Ph. D. Massachusetts Institute of Technology
Advisor(s)
S.P. Kothari.
Date Issued
2005
Publisher
Massachusetts Institute of Technology
Abstract
In this paper, I examine the ex post and ex ante benefits of conservatism to lenders and borrowers in the debt contracting process. First, I argue that conservatism benefits lenders ex post through a timely signal of default risk in the form of accelerated covenant violations by more conservative borrowers. I present evidence that the likelihood of a covenant violation following a negative shock increases in borrower conservatism. Second, I argue that conservatism benefits borrowers ex ante through lower initial interest rates. I provide both in- sample and out-of-sample evidence that lenders offer lower interest rates to more conservative borrowers. The result is robust to controlling for a series of other earnings attributes.
Description
Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2005.
Includes bibliographical references (leaves 55-57).
Subjects
Sloan School of Management.
MIT Department
Sloan School of Management
Terms of Use
M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.
Persistent DSpace Link
