Direct Evidence on the Informational Properties of Earnings in Loan Contracts

• 成果类型: Article
• 署名作者: Dyreng, Scott D.; Vashishtha, Rahul; Weber, Joseph
• 署名单位: Duke University; Massachusetts Institute of Technology (MIT)
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12168
• 发表日期: 2017
• 页码: 371-406
• 关键词: accounting information; Debt covenants; positive research; conservatism; GAAP; EFFICIENCY; STANDARDS; selection; QUALITY; decline

摘要

Using a sample of firms that disclose the realizations of earnings used for determining covenant compliance in loan contracts, we provide direct evidence on the informational properties of earnings used in the performance covenants included in debt contracts. We find that the earnings measure used in performance covenants does not exhibit asymmetric loss timeliness and has significantly greater cash flow predictive ability than GAAP measures of earnings. We suggest that these results reflect the idea that contracting parties design accounting rules for performance covenants to enhance their efficacy as tripwires.