Title of article :
The effects of firm-initiated clawback provisions on bank loan contracting
Author/Authors :
Chan، نويسنده , , Lilian H. and Chen، نويسنده , , Kevin C.W. and Chen، نويسنده , , Tai-Yuan، نويسنده ,
Issue Information :
روزنامه با شماره پیاپی سال 2013
Abstract :
Although firm-initiated clawbacks reduce accounting manipulation, they also induce managers to engage in suboptimal activities (e.g., reduce research and development (R&D) expenses) to achieve earnings targets. To assess the effectiveness of clawback provisions, we examine their impact from debtholdersʹ point of view. We find that banks use more financial covenants and performance pricing provisions in the loan contracts and decrease interest rates after firms initiate clawbacks. Moreover, we also find that loan maturity increases and loan collateral decreases subsequent to clawback adoption. Taken together, our findings indicate that firm-initiated clawback provisions enhance financial reporting quality, thereby reducing the information uncertainty that financing providers face.
Keywords :
information uncertainty , Bank loans , Voluntary clawbacks
Journal title :
Journal of Financial Economics
Journal title :
Journal of Financial Economics