Financial Statements as Monitoring Mechanisms: Evidence from Small Commercial Loans

• 成果类型: Article
• 署名作者: Minnis, Michael; Sutherland, Andrew
• 署名单位: University of Chicago; Massachusetts Institute of Technology (MIT)
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12127
• 发表日期: 2017
• 页码: 197-233
• 关键词: imperfect information; credit markets; SMALL BANKS; PRIVATE; FIRMS; incentives; COSTS

摘要

Using a data set that records banks' ongoing requests of information from small commercial borrowers, we examine when banks use financial statements to monitor borrowers after loan origination. We find that banks request financial statements for half the loans and this variation is related to borrower credit risk, relationship length, collateral, and the provision of business tax returns, but in complex ways. The relation between borrower risk and financial statement requests has an inverted U-shape; and tax returns can be both substitutes and complements to financial statements, conditional on borrower characteristics and the degree of bank-borrower information asymmetry. Frequent financial reporting is used to monitor collateral, but only for non-real estate loans and only when the collateral is easily accessible to lenders. Collectively, our results provide novel evidence of a fundamental information demand for financial reporting in monitoring small commercial borrowers and a specific channel through which banks fulfill their role as delegated monitors.