Economics, Econometrics and Finance
3 years ago

Lenders' Loan Defaults Prompt Firms to Improve Financial Reporting Accuracy.

1 view
SSRN Electronic Journal
Do Lenders Affect Firms' Disclosure Decisions? Evidence from Lender-Side Loan Defaults
Janet Gao, Chuchu Liang, Kenneth J. Merkley, Joseph Pacelli

Paper Summary

Lenders' past loan defaults make companies report losses more quickly. This happens because lenders tighten rules and watch more closely after facing defaults. This study shows that when lenders have bad experiences, companies change how they report financial losses.

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