Asset Measurement in Imperfect Credit Markets

Jeremy Bertomeu and Edwige Cheynel

Journal of Accounting Research, 2015, vol. 53, issue 5, 965-984

Abstract: How should a firm measure a productive asset used as collateral? To answer this question, we develop a model in which firms borrow funds subject to collateral constraints. We characterize the qualities of optimal asset measurements and analyze their interactions with financing needs, collateral constraints, and interest rates. Because of real effects, complete transparency would reduce contracting efficiency and, hence, the measurement must be suitably adapted to credit conditions. The optimal measurement is asymmetric and reports precise information about high collateral values if credit frictions are low, but the reverse if credit frictions are high. Tighter credit market conditions may lead to more opaque measurements and increased investment, in the form of inefficient continuations.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
https://doi.org/10.1111/1475-679X.12096

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:joares:v:53:y:2015:i:5:p:965-984

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0021-8456

Access Statistics for this article

Journal of Accounting Research is currently edited by Philip G. Berger, Luzi Hail, Christian Leuz, Haresh Sapra, Douglas J. Skinner, Rodrigo Verdi and Regina Wittenberg Moerman

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