THE DIFFERENTIAL IMPACT OF PRIVATE AND PUBLIC DEBT ON ACCOUNTING CONSERVATISM

Fengyun Wu

Accounting & Taxation, 2021, vol. 13, issue 1, 109-119

Abstract: The private and public debt markets differ in monitoring functions and covenant features. This paper empirically examines whether these differences impact accounting conservatism. Using a sample drawn from Loan Pricing Corporation’s Dealscan, I find that firms report more conservatively in the years following the issuance of private debt than the years before. I also find that firms report more conservatively following initial public debt offerings (bond IPOs). However, there is no change in the degree of conservatism around seasoned bond offerings. I interpret the results as reflecting differences in monitoring functions of the private and public debt markets. The direct monitoring by private debt holders and the external monitoring including regulatory scrutiny in the context of bond IPOs are effective in enforcing accounting conservatism. The limited monitoring in the case of seasoned bonds fails to do so.

Keywords: Accounting Conservatism; Monitoring Function of Debt; Private Debt; Public Debt (search for similar items in EconPapers)
JEL-codes: M41 M42 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.theibfr2.com/RePEc/ibf/acttax/at-v13n1-2021/AT-V13N1-2021-8.pdf (application/pdf)

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:ibf:acttax:v:13:y:2021:i:1:p:109-119

Access Statistics for this article

Accounting & Taxation is currently edited by Terrance Jalbert

More articles in Accounting & Taxation from The Institute for Business and Finance Research
Bibliographic data for series maintained by Mercedes Jalbert ( this e-mail address is bad, please contact ).