Banking practices and borrowing firms' financial reporting quality: evidence from bank cross-selling

• 成果类型: Article
• 署名作者: Su, Barbara
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Temple University
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-021-09640-6
• 发表日期: 2023
• 页码: 201-236
• 关键词: Investment banking; COMMERCIAL-BANKS; Accounting information; reputation; certification; conservatism; CONTRACTS; determinants; covenants; benefits

摘要

This paper studies whether banking practices affect borrowing firms' financial reporting quality. Specifically, I examine the effect of bank cross-selling activities (i.e., a bank's joint provisions of lending and underwriting services to the same firm) on borrowers' financial reporting quality for debt contracting purposes. Compared to issuing stand-alone loans, cross-selling increases a bank's risk exposure to the firm and therefore gives the bank more motivation to monitor the borrower's financial condition (incentive effect). In addition, cross-selling enables information sharing between the underwriting and lending divisions and allows the bank to have a closer understanding of the borrower's underlying economics, which disciplines the borrower's ability to withhold bad news (information effect). Consistent with these arguments, I expect and find that cross-selling is associated with an improvement in the debt contracting value (DCV) of accounting information at borrowing firms. I also provide evidence in support of the incentive effect and the information effect.