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- Publisher Website: 10.1016/j.jfineco.2013.08.010
- Scopus: eid_2-s2.0-84885870037
- WOS: WOS:000326991600009
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Article: The effects of firm-initiated clawback provisions on bank loan contracting
Title | The effects of firm-initiated clawback provisions on bank loan contracting |
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Authors | |
Keywords | Bank loans Information uncertainty Voluntary clawbacks |
Issue Date | 2013 |
Publisher | Elsevier. The Journal's web site is located at http://www.elsevier.com/locate/jfec |
Citation | Journal of Financial Economics, 2013, v. 110, p. 659-679 How to Cite? |
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 debtholders' 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. |
Persistent Identifier | http://hdl.handle.net/10722/197653 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Chan, LHL | en_US |
dc.contributor.author | Chen, KCW | en_US |
dc.contributor.author | Chen, TY | en_US |
dc.date.accessioned | 2014-05-29T08:36:09Z | - |
dc.date.available | 2014-05-29T08:36:09Z | - |
dc.date.issued | 2013 | en_US |
dc.identifier.citation | Journal of Financial Economics, 2013, v. 110, p. 659-679 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/197653 | - |
dc.description.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 debtholders' 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. | en_US |
dc.language | eng | en_US |
dc.publisher | Elsevier. The Journal's web site is located at http://www.elsevier.com/locate/jfec | en_US |
dc.relation.ispartof | Journal of Financial Economics | en_US |
dc.rights | NOTICE: this is the author’s version of a work that was accepted for publication in <Journal title>. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in PUBLICATION, [VOL#, ISSUE#, (DATE)] DOI# | en_US |
dc.subject | Bank loans | - |
dc.subject | Information uncertainty | - |
dc.subject | Voluntary clawbacks | - |
dc.title | The effects of firm-initiated clawback provisions on bank loan contracting | en_US |
dc.type | Article | en_US |
dc.identifier.email | Chan, LHL: lchan@business.hku.hk | en_US |
dc.identifier.authority | Chan, LHL=rp01048 | en_US |
dc.identifier.doi | 10.1016/j.jfineco.2013.08.010 | en_US |
dc.identifier.scopus | eid_2-s2.0-84885870037 | - |
dc.identifier.hkuros | 228820 | en_US |
dc.identifier.volume | 110 | en_US |
dc.identifier.spage | 659 | en_US |
dc.identifier.epage | 679 | en_US |
dc.identifier.isi | WOS:000326991600009 | - |
dc.publisher.place | USA | en_US |