Continuous reporting benefits in the private debt capital market

DeWayne L. Searcy, Terry J. Ward and Jon B. Woodroof

International Journal of Accounting Information Systems, 2009, vol. 10, issue 3, 137-151

Abstract: The study is an experiment, administered over the Internet, measuring the effect that continuous reporting has on a company's ability to secure private debt capital. Specifically, we test whether commercial loan officers would be more willing to increase the probablity of loan acceptance to a mid-sized company operating in a continuous reporting environment than they would a company that operates in a traditional reporting environment. We find that high risk companies providing financial information to the lender on a daily basis have a higher probability of loan acceptance than do companies providing financial information to the lender on a quarterly basis. We did not find any results for low risk companies, suggesting the potential benefits of continuous reporting might not accrue to those type companies. The results were robust for both new and existing banking relationship scenarios. We did not find any results for the interest rate variable. The results of this study have significant implications for companies determined to be high risk. Commercial loans are the life-support for many companies, and failure to secure a line-of-credit could have devastating consequences for these high-risk companies.

Keywords: Continuous auditing; Continuous reporting; Default risk; Commercial lending; Banking relationship (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ijoais:v:10:y:2009:i:3:p:137-151

DOI: 10.1016/j.accinf.2008.11.003

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