Negative Earnings and the Cost of Debt: Evidence from the Emerging Tunisian Market

Asma Houcine ()
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Asma Houcine: University of Dubai

A chapter in Contemporary Research in Accounting and Finance, 2022, pp 73-92 from Springer

Abstract: Abstract We investigate the impact of reporting negative earnings on the cost of debt for a sample of Tunisian firms for period 2008–2018. Since negative earnings are recognized as having low earnings quality, the shift from positive earnings to negative earnings is seen as a decrease in earnings quality. The publication of Negative earnings will contribute to an increase in firm’s information risk, which may influence lenders’ decisions by increasing the borrower's cost of debt. The results confirm the research hypothesis indicating that firms that experience a shift from positive to negative earnings within two years of reporting negative earning are supporting an increase in the cost of debt. The study's findings may be of interest to accounting literature, managers, and bankers, since it provides evidence on the effects of negative earnings on the cost of debt.

Keywords: Negative earnings; Information risk; Cost of debt; Emerging market (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-16-8267-4_3

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DOI: 10.1007/978-981-16-8267-4_3

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