The effects of firm-initiated clawback provisions on bank loan contracting

• 成果类型: Article
• 署名作者: Chan, Lilian H.; Chen, Kevin C. W.; Chen, Tai-Yuan
• 署名单位: University of Hong Kong; Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.08.010
• 发表日期: 2013
• 页码: 659-679
• 关键词: Voluntary clawbacks; bank loans; INFORMATION UNCERTAINTY

摘要

Although firm-initiated clawbacks reduce accounting manipulation, they also induce managers to engage in suboptimal activities (e.g., reduce research and development (R&D) expenses) to achieve earnings targets. To assess the effectiveness of clawback provisions, we examine their impact from debtholders' point of view. We find that banks use more financial covenants and performance pricing provisions in the loan contracts and decrease interest rates after firms initiate clawbacks. Moreover, we also find that loan maturity increases and loan collateral decreases subsequent to clawback adoption. Taken together, our findings indicate that firm-initiated clawback provisions enhance financial reporting quality, thereby reducing the information uncertainty that financing providers face. (C) 2013 Elsevier B.V. All rights reserved.