| Author: | Zhu, Xindong |
| Title: | Debt maturity and conservatism |
| Degree: | Ph.D. |
| Year: | 2010 |
| Subject: | Hong Kong Polytechnic University -- Dissertations Corporate debt Financial statements |
| Department: | School of Accounting and Finance |
| Pages: | viii, 164 leaves : ill. ; 30 cm. |
| Language: | English |
| Abstract: | In this thesis, I investigate the empirical relation between a firm's short-term debt and conservatism in financial reporting. As both are costly mechanisms to resolve the agency problem between the shareholders and the debtholders, I expect that they act as substitutes if managers choose them in a cost-effective way. I find a negative association between the change in short-term debt and in conservatism, which is consistent with the expectation. The result is robust to alternative measures of short-term debt and accounting conservatism. I further examine the individual and joint effect of short-term debt and conservatism on the firm's cost of debt. I find that the increase of short-term debt or of conservatism is associated with the decrease of the firm's cost of debt. More importantly, I find that short-term debt and accounting conservatism act as substitutes in reducing the firm's cost of debt. The results are robust after controlling for cross-sectional correlations, heteroscedasticity and autocorrelations. Overall, these results suggest that short-term debt and conservatism both act as monitoring mechanisms to resolve agency problem in terms of lower cost of debt and firms tend to substitute these two mechanisms in a rational cost-effective way. |
| Rights: | All rights reserved |
| Access: | open access |
Files in This Item:
| File | Description | Size | Format | |
|---|---|---|---|---|
| b23930706.pdf | For All Users | 864.24 kB | Adobe PDF | View/Open |
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