Management earnings forecasts and bank loan contracting

Tien‐Shih Hsieh, Byron Y. Song, Ray R. Wang and Xinlu Wang

Journal of Business Finance & Accounting, 2019, vol. 46, issue 5-6, 712-738

Abstract: 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.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://doi.org/10.1111/jbfa.12371

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jbfnac:v:46:y:2019:i:5-6:p:712-738

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0306-686X

Access Statistics for this article

Journal of Business Finance & Accounting is currently edited by P. F. Pope, A. W. Stark and M. Walker

More articles in Journal of Business Finance & Accounting from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().