The debt-contracting value of accounting information and loan syndicate structure
Journal
Journal of Accounting Research
Subject
Accounting
Publishing details
Authors / Editors
Ball R; Bushman R M; Vasvari F
Biographies
Publication Year
2008
Abstract
We investigate how both the ownership structure and explicit contractual structure of syndicated loan deals are shaped by the debt-contracting value (DCV) of borrowers' accounting information. DCV captures the inherent ability of firms' accounting numbers to capture credit quality deterioration in a timely fashion. We hypothesize and document that when a borrower's accounting information possesses higher DCV, information asymmetry between the lead arranger and other syndicate participants is lower, allowing lead arrangers to hold a smaller proportion of new loan deals. Further, we document that the influence of DCV on the proportion of the loan retained is conditional on the lead arranger's reputation, the existence of a credit rating, and the lead arranger's previous relationships with the same borrower. Finally, we find that when loans include performance pricing provisions, the likelihood
Publication Research Centre
Institute of Finance and Accounting
Available on ECCH
No
