Accounting Conservatism and Debt Contract Efficiency with Soft Information

Hedge Commitments and Agency Costs of Debt: Evidence from Interest Rate Protection Covenants and Accounting Conservatism

Debt Renegotiation With Incomplete Contract

A debt contract usually does not include a provision about renegotiation. The right to seize the borrower’s asset and the rules of this process are usually stipulated in the contract. Such a promise not to renegotiate is not credible since renegotiation can mitigate the dead-weight loss of liquidating insolvent borrowers. Once the initial contract may not consider the renegotiation procedure an...

Accounting Conservatism and Real Options

I address the interaction between accounting conservatism and real options in both a staged investment and abandonment model. An accounting policy biased towards classifying a Good (Bad) project as Bad (Good) is conservative (aggressive). The accounting signal is optimally conservative when the ex ante unconditional expected terminal value is less than the second investment (staged investment) ...

Identifying Conditional Conservatism in the Presence of Risky Debt and Mixed Attribute Accounting

Seminars for useful comments. *** The main portions of the paper that have not yet been performed and/or written up are: (1) the empirical results related to return volatility and credit ratings have been performed (and are entirely consistent with those presented) but not yet written up; and (2) some statistical tests have not been performed and all statistical tests do not incorporate the usu...

Is Accounting Conservatism Due to Debt or Equity Markets? An International Test of “Contracting” and “Value Relevance” Theories of Accounting

Acknowledgments We gratefully acknowledge the comments of Sudipta Basu, Christian Leuz and Jerry Zimmerman, the referee, and workshop participants at the Universities of Amsterdam and Chicago. We are grateful for financial support from the University of Chicago, Graduate School of Business. Abstract We provide a simple test of " costly contracting " and " value relevance theories " of accountin...