Mitigating incentive conflicts in inter-firm relationships: Evidence from long-term supply contracts

• 成果类型: Article
• 署名作者: Costello, Anna M.
• 署名单位: Massachusetts Institute of Technology (MIT)
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2013.02.001
• 发表日期: 2013
• 关键词: debt maturity; Trade credit; Accounting information; incomplete contracts; capital structure; price adjustment; EQUITY OWNERSHIP; product quality; Private Firms; natural-gas

摘要

Using a sample of long-term supply contracts collected from SEC filings, I show that hold-up concerns and information asymmetry are important determinants of contract design. Asymmetric information between buyers and suppliers leads to shorter term contracts. However, when longer duration contracts facilitate the exchange of relationship specific assets, the parties substitute short-term contracts with financial covenants in order to reduce moral hazard. Covenant restrictions are more prevalent when direct monitoring is costly and the products exchanged are highly specific. Finally, I find that buyers and suppliers are less likely to rely on financial covenants when financial statement reliability is low. (C) 2013 Elsevier B.V. All rights reserved.