Earnings Quality and Debt Contracting

• Main Authors: Lin, Ya-Jou, 林雅柔
• Other Authors: Fan, Hung-Shu
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/09382399583410307981

碩士 === 輔仁大學 === 會計學系碩士班 === 94 === This study uses 2000~ 2004 listed companies to test whether the companes’ creditors examine the financial statements provided by the listed companies to check their earnings quality and decide the terms of the loan contracts and mitigate the risk of default. This research is the first one in Taiwan to examine the relationship between earnings quality and debt contracting. This thesis adopts absolute Jones-model, modified-Jones-model discretionary accruals and absolute total-accruals to proxy the earnings quality. Furthmore, this study uses loan rate, maturity, collateral to examines the the terms of the loan contracts. The empirical findings of this study are as follows: First, the larger the absolute Jones-model and modified-Jones-model discretionary accruals, the higher the loan rate. This results show that for a company with lower earnings quality, the interest rate will be higher to compensate the potential higher default of lenders and the cost of the borrowing will be higher, accordingly. Second, the larger the absolute Jones-model, modified-Jones-model discretionary accruals and absolute total-accruals, the shorter the maturity of the loan contracts. This evidences that in order to mitigate the high default risk of borrowers with poor earnings quality, the lenders will reduce the maturity of the borrowers’ loan contracts. Third, there are no relationships between the collateral requirements in the loan contracts and any earnings quality proxy variable. This shows that isted companies, maybe, almost borrow money by credit instead of by collateral results.