The roll of accounting in debt contract renegotiations : evidence from positive shocks

Using a hand-collected sample of private debt contracts between U.S. publicly traded firms and financial institutions, I examine the role of accounting in the renegotiation of debt contracts following a positive shock to the borrower's credit quality. I find that, following a positive shock to their credit quality, firms with more timely reporting of good news are more likely to renegotiate their loan contracts and they do so sooner than firms with less timely good news reporting. Further, these effects are more pronounced for firms whose positive shocks can be more credibly communicated through financial reporting. My paper contributes to the literature on the role of accounting information in debt contract renegotiations.

Department dc:contributor.department

Sloan School of Management.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2014

Author dc:creator

• Zheng, Kexin, Ph. D. Massachusetts Institute of Technology

Advisor dc:contributor.advisor

• Joseph Weber.

• Sloan School of Management.

Statement dc:rights

• 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.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/97865

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/97865