Monetary policy tightening, accounting information comparability and bank borrowing

Xin Ding and Zhonghai Yang

China Journal of Accounting Studies, 2020, vol. 8, issue 1, 1-34

Abstract: This paper empirically tests the effect of accounting information comparability quality characteristic on the scale, the cost and the credit term structure of bank borrowing of the listed companies as well as whether accounting information comparability can affect the bank credit financing of the listed companies in the period of monetary policy tightening by utilising the data during 2005 to 2015 in Chinese Ａ -share market. This study finds that: Firstly, the higher of the accounting information comparability, the more of the scale of bank borrowing acquired, the lower of the cost of bank borrowing; Secondly, agent cost hypothesis and the signal transmission hypothesis exist simultaneously in the credit term structure of listed companies in China. For the listed companies with short-term credit structure, improving accounting information comparability will help extending that credit term structure, supporting the agent cost hypothesis. For the listed companies with long-term credit term structure, improving accounting information comparability will reduce that credit term structure, which provides the empirical evidence of the signal transmission hypothesis. Thirdly, in the monetary tightening period, improving accounting information comparability could effectively increase the amount of bank borrowing acquired, reduce the cost of bank borrowing and extend credit term structure (the listed companies with short-term credit structure). For the listed companies with long-term credit term structure, the listed companies with much higher accounting information comparability will weaken the motivation of releasing the ‘higher quality’ signal to the capital market, that is to say, the signal transmission effect is very likely to be constrained in the monetary tightening period. The conclusions of this paper enrich the economic consequences research of the accounting information comparability and expand the research on the interaction between macroeconomic policies and micro-financial behaviour of the corporate. Our results open up new horizons for the banks, the financial decision of listed companies and government department making decision.

Date: 2020
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DOI: 10.1080/21697213.2020.1764200

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