The Dynamics of Borrower Reputation Following Financial Misreporting

• 成果类型: Article
• 署名作者: Chava, Sudheer; Huang, Kershen; Johnson, Shane A.
• 署名单位: University System of Georgia; Georgia Institute of Technology; Bentley University; Texas A&M University System; Texas A&M University College Station; Mays Business School
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2017.2739
• 发表日期: 2018
• 页码: 4775-4797
• 关键词: Reputation; Cost of debt; bank loans; financial restatements; FRAUD

摘要

We study the dynamics of borrower reputation in bank loan markets following revelations of financial misreporting by the borrower. Misreporting firms pay greater loan spreads than matched firms for at least six years following revelation of the misreporting, and there is no evidence of a downward trend in the misreporting premium. Following revelation, misreporting firms are more likely to engage in various actions to potentially rebuild their reputations, but even firms that engage in multiple actions continue to pay greater loan spreads for at least six years. Our results suggest that misreporting causes long-lasting and costly reputation losses that firms find very difficult or prohibitively costly to restore.