Accounting flexibility and managers’ forecast behavior prior to seasoned equity offerings

Kim, Jae Bum

doi:10.1007/s11142-016-9372-0

Cited by 24 publications

(28 citation statements)

References 65 publications

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“…Although external financing is undoubtedly essential for firms, the literature has not provided consistent results in explaining how external financing activities can affect companies’ voluntary disclosures. For example, prior studies (Kim, ; Lees, ; Ruland, Tung, & George, ) suggest that external financing could motivate managers to issue more management forecasts. Frankel et al.…”

Section: Introductionmentioning

confidence: 99%

“…Since management earnings forecasts are endogenously determined, empirical studies about management earnings forecasts (Kim, ; Kim, Shroff, Vyas, & Wittenberg‐Moerman, ) often encounter the challenge of the endogeneity issue. To address the endogeneity concern that the association between management earnings forecasts and bank loan contracting could be driven by borrowers’ underlying performance, we adopt a propensity score matching (PSM) procedure to construct a matched sample to further test our research hypotheses.…”

Section: Introductionmentioning

confidence: 99%

“…To address the endogeneity concern that the association between management earnings forecasts and bank loan contracting could be driven by borrowers’ underlying performance, we adopt a propensity score matching (PSM) procedure to construct a matched sample to further test our research hypotheses. We also include the inverse Mills ratio ( IMR ) to control for potential selection bias (Heckman, ) when testing how management forecast properties (e.g., good news or forecast accuracy) affect bank loan contract terms (Kim, ).…”

Section: Introductionmentioning

confidence: 99%

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Management earnings forecasts and bank loan contracting

Hsieh

Song

Wang

et al. 2019

Business Fin & Account

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We find that firms tend to issue management earnings forecasts and convey good news before bank loan initiation. Issuing firms enjoy more favorable contracting terms and attract more lenders. Management forecasts issuance within a nine-month period prior to the loan activating quarter can lower the subsequent loan spread by 14.06 basis points. Moreover, firms with larger management forecast errors are charged harsher contracting terms and attract fewer lenders. Our study suggests that firms strategically issue management earnings forecasts before entering into debt contracts and lenders incorporate the information contained in management earnings forecasts into bank loan contracting. K E Y W O R D Sbank loan contracting, good news, management earnings forecast, management forecast errors, voluntary disclosure 712

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Management earnings forecasts and bank loan contracting

Hsieh

Song

Wang

et al. 2019

Business Fin & Account

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“…This study contributes to the literature in several ways. First, prior literature investigates the impact of managerial incentives on corporate disclosures in the setting of equity offerings (Frankel, McNichols and Wilson, ; Marquardt and Wiedman, ; Lang and Lundholm, ; Kim, ), stock repurchases (Brockman, Khurana and Martin, ), management buyout offers (Hafzalla, ), stock‐for‐stock mergers (Ge and Lennox, ), stock and stock option grants (Aboody and Kasznik, ; Nagar, Nanda, and Wysocki, ), and insider trading (Bushman and Indjejikian, ; Rogers and Stocken, ; Cheng and Lo, ; Rogers, ; Cheng, Luo and Yue, ). Nevertheless, despite the importance of credit rating to a firm, little research attention has been paid to managers’ use of voluntary disclosures to influence credit ratings.…”

Section: Introductionmentioning

confidence: 99%

Credit Ratings and Managerial Voluntary Disclosures

2018

The Financial Review

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This study investigates whether managers influence credit ratings via voluntary disclosures. I find that firms near a rating change have a higher incidence of a disclosure regarding product and business expansion (PBE) plans. This finding is more evident for firms that are subject to lower proprietary costs of disclosures, which implies that managers do trade off both the benefits and costs of the disclosures. I find no evidence that firms close to a rating change selectively release good news or suppress bad news on PBE. Overall, my results suggest that firms generally exhibit a credible commitment to maintaining disclosure transparency for a desired credit rating.

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“…It is therefore noted that the accounting flexibility derived from the accrual basis coupled with the divergent interests involved in a firm's management may stimulate discretionary behaviors (Kim, 2016) and thus influence investment decisions and investment-cash flow sensitivity. Based on the research problem, this study aims to investigate whether the quality of financial information influences the efficiency of corporate investment decisions in seven countries in Latin America -Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela.…”

Section: Introductionmentioning

confidence: 99%

Earnings quality, investment decisions, and financial constraint

Carvalho

Kalatzis

2018

RBGN

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Purpose-The purpose of this study was to investigate the relationship between accruals quality, financial constraint, and investment decisions and if earnings quality affects investment-cash flow sensitivities. Design/methodology/approach-An analysis was conducted of a sample with 10,318 observations of 958 non-financial companies from seven different countries, covering 1992 to 2009. Then, the investment determinants were estimated using the Generalized Method of Moments (GMM). Findings-Poor accruals quality was positively associated with investment rates for firms with overinvestment and negatively related to investment rates for firms with underinvestment. Additionally, the results indicate that accruals quality affects investment-cash flow sensitivities for firms in a situation of financial constraint; that is, poor accounting information quality can exacerbate the dependence of investment on free cash flow. Originality/value-The results show that poor accruals quality could exacerbate the problems caused by the conflict of interest between decision-makers and shareholders or other stakeholders.

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Accounting flexibility and managers’ forecast behavior prior to seasoned equity offerings

Cited by 24 publications

References 65 publications

Management earnings forecasts and bank loan contracting

Management earnings forecasts and bank loan contracting

Credit Ratings and Managerial Voluntary Disclosures

Earnings quality, investment decisions, and financial constraint

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