Effects of earnings management on bank cost of debt

Shen, Chung‐Hua; Huang, Yu-Li

doi:10.1111/j.1467-629x.2011.00455.x

“…In the last few years, researchers have found new determinants of the cost of debt. For example, the cost of bank loans can be reduced if: (1) the loans are made by more competitive and skilled banks (Ongena and Roscovan, 2013); (2) the likelihood of earnings management on credit ratings is low (Shen and Huang, 2013); (3) the firm has higher bond liquidity (Darwin, Treepongkaruna, and Faff, 2012); and (4) the firm has higher discretionary accruals (Aldamen and Duncan, 2013). 18…”

Section: Fees For Credit Ratingsmentioning

confidence: 99%

A Contemporary View of Corporate Finance Theory, Empirical Evidence and Practice

Faff

¹

,

Gray

²

,

Tan

³

2015

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This paper uses a survey of Australian Corporate Treasurers to shed light on the gap between the theory and practice of corporate finance in Australia. Seven areas are examined: capital structure, payout policy, cash holdings, initial public offerings, seasoned equity offering, mergers and acquisitions, and corporate governance. We also exploit the Global Financial Crisis to examine the effect of liquidity shocks on a firm's capital structure choices. We then compare our Australian survey results with results from a comprehensive U.S. survey conducted by Graham and Harvey (2001). Our survey shows that the board of directors play the most important role in determining capital structure decisions and that corporate treasurers play the most important role in cash holding decisions. This contrasts with the academic literature that has typically focused on the role of CEO in both capital structure and cash holdings decisions. In addition, our respondents do not view the tax advantage of interest deductibility to be of first order of importance for debt issuance choices, which contrasts with most of the U.S. empirical studies. Finally, we juxtapose the theory-practice perspective, with a review of the most recent five years (2011)(2012)(2013)(2014)(2015) of corporate finance research published in the leading Asia Pacific Basin finance journals. Abstract This paper uses a survey of Australian Corporate Treasurers to shed light on the gap between the theory and practice of corporate finance in Australia. Seven areas are examined: capital structure, payout policy, cash holdings, initial public offerings, seasoned equity offering, mergers and acquisitions, and corporate governance. We also exploit the Global Financial Crisis to examine the effect of liquidity shocks on a firm's capital structure choices. We then compare our Australian survey results with results from a comprehensive U.S. survey conducted by Graham and Harvey (2001). Our survey shows that the board of directors play the most important role in determining capital structure decisions and that corporate treasurers play the most important role in cash holding decisions. This contrasts with the academic literature that has typically focused on the role of CEO in both capital structure and cash holdings decisions. In addition, our respondents do not view the tax advantage of interest deductibility to be of first order of importance for debt issuance choices, which contrasts with most of the U.S. empirical studies. Finally, we juxtapose the theory-practice perspective, with a review of the most recent five years (2011)(2012)(2013)(2014)(2015) of corporate finance research published in the leading Asia Pacific Basin finance journals.

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“…The results of such papers will be more easily generalisable if carried out on an international sample from developed and emerging economies. Shen and Huang (2013) is one such international study on bank regulation where bank data from 85 countries were used to study the effects of earnings management on credit ratings and cost of debt. Future research can take a more pre-emptive rather than reactive approach to the investigation of regulatory effects.…”

Section: Banking and Financial Institutions Regulationmentioning

confidence: 99%

A review of research on regulation changes in the Asia‐Pacific region

Chang

¹

,

Jackson

²

,

Wee

³

2017

Accounting & Finance

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In this study, we review the financial research on regulation in the Asia-Pacific region. We do this by analysing six leading regional accounting and finance journals -Abacus, Accounting & Finance, Australian Accounting Review, Australian Journal of Management, International Review of Finance and the Pacific-Basin Finance Journal. We identify five main themes of regulation research relating to: (i) banking and financial institutions, (ii) markets and trading, (iii) corporate governance, (iv) disclosure and (v) accounting standard setting. Our paper synthesises the regional literature in these areas and provide some suggestions for future directions.

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“…In the last few years, researchers have found new determinants of the cost of debt. For example, the cost of bank loans can be reduced if: (1) the loans are made by more competitive and skilled banks (Ongena and Roscovan, 2013); (2) the likelihood of earnings management on credit ratings is low (Shen and Huang, 2013); (3) the firm has higher bond liquidity (Darwin, Treepongkaruna, and Faff, 2012); and (4) the firm has higher discretionary accruals (Aldamen and Duncan, 2013). …”

Section: Fees For Credit Ratingsmentioning

confidence: 99%

A contemporary view of corporate finance theory, empirical evidence and practice

Faff

¹

,

Gray

²

,

Tan

³

2016

Australian Journal of Management

12

0

View full text Add to dashboard Cite

This paper uses a survey of Australian Corporate Treasurers to shed light on the gap between the theory and practice of corporate finance in Australia. Seven areas are examined: capital structure, payout policy, cash holdings, initial public offerings, seasoned equity offering, mergers and acquisitions, and corporate governance. We also exploit the Global Financial Crisis to examine the effect of liquidity shocks on a firm's capital structure choices. We then compare our Australian survey results with results from a comprehensive U.S. survey conducted by Graham and Harvey (2001). Our survey shows that the board of directors play the most important role in determining capital structure decisions and that corporate treasurers play the most important role in cash holding decisions. This contrasts with the academic literature that has typically focused on the role of CEO in both capital structure and cash holdings decisions. In addition, our respondents do not view the tax advantage of interest deductibility to be of first order of importance for debt issuance choices, which contrasts with most of the U.S. empirical studies. Finally, we juxtapose the theory-practice perspective, with a review of the most recent five years (2011)(2012)(2013)(2014)(2015) of corporate finance research published in the leading Asia Pacific Basin finance journals. Abstract This paper uses a survey of Australian Corporate Treasurers to shed light on the gap between the theory and practice of corporate finance in Australia. Seven areas are examined: capital structure, payout policy, cash holdings, initial public offerings, seasoned equity offering, mergers and acquisitions, and corporate governance. We also exploit the Global Financial Crisis to examine the effect of liquidity shocks on a firm's capital structure choices. We then compare our Australian survey results with results from a comprehensive U.S. survey conducted by Graham and Harvey (2001). Our survey shows that the board of directors play the most important role in determining capital structure decisions and that corporate treasurers play the most important role in cash holding decisions. This contrasts with the academic literature that has typically focused on the role of CEO in both capital structure and cash holdings decisions. In addition, our respondents do not view the tax advantage of interest deductibility to be of first order of importance for debt issuance choices, which contrasts with most of the U.S. empirical studies. Finally, we juxtapose the theory-practice perspective, with a review of the most recent five years (2011)(2012)(2013)(2014)(2015) of corporate finance research published in the leading Asia Pacific Basin finance journals.

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Effects of earnings management on bank cost of debt

Cited by 46 publications

References 70 publications

A Contemporary View of Corporate Finance Theory, Empirical Evidence and Practice

A Contemporary View of Corporate Finance Theory, Empirical Evidence and Practice

A review of research on regulation changes in the Asia‐Pacific region

A contemporary view of corporate finance theory, empirical evidence and practice

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