Direct Evidence on the Informational Properties of Earnings in Loan Contracts
Publication
, Journal Article
Dyreng, SD; Vashishtha, R; Weber, J
Published in: Journal of Accounting Research
May 1, 2017
Using a sample of firms that disclose the realizations of earnings used for determining covenant compliance in loan contracts, we provide direct evidence on the informational properties of earnings used in the performance covenants included in debt contracts. We find that the earnings measure used in performance covenants does not exhibit asymmetric loss timeliness and has significantly greater cash flow predictive ability than GAAP measures of earnings. We suggest that these results reflect the idea that contracting parties design accounting rules for performance covenants to enhance their efficacy as “tripwires.”.
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Published In
Journal of Accounting Research
DOI
EISSN
1475-679X
ISSN
0021-8456
Publication Date
May 1, 2017
Volume
55
Issue
2
Start / End Page
371 / 406
Related Subject Headings
- Accounting
- 3502 Banking, finance and investment
- 3501 Accounting, auditing and accountability
- 1502 Banking, Finance and Investment
- 1501 Accounting, Auditing and Accountability
Citation
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Chicago
ICMJE
MLA
NLM
Dyreng, S. D., Vashishtha, R., & Weber, J. (2017). Direct Evidence on the Informational Properties of Earnings in Loan Contracts. Journal of Accounting Research, 55(2), 371–406. https://doi.org/10.1111/1475-679X.12168
Dyreng, S. D., R. Vashishtha, and J. Weber. “Direct Evidence on the Informational Properties of Earnings in Loan Contracts.” Journal of Accounting Research 55, no. 2 (May 1, 2017): 371–406. https://doi.org/10.1111/1475-679X.12168.
Dyreng SD, Vashishtha R, Weber J. Direct Evidence on the Informational Properties of Earnings in Loan Contracts. Journal of Accounting Research. 2017 May 1;55(2):371–406.
Dyreng, S. D., et al. “Direct Evidence on the Informational Properties of Earnings in Loan Contracts.” Journal of Accounting Research, vol. 55, no. 2, May 2017, pp. 371–406. Scopus, doi:10.1111/1475-679X.12168.
Dyreng SD, Vashishtha R, Weber J. Direct Evidence on the Informational Properties of Earnings in Loan Contracts. Journal of Accounting Research. 2017 May 1;55(2):371–406.
Published In
Journal of Accounting Research
DOI
EISSN
1475-679X
ISSN
0021-8456
Publication Date
May 1, 2017
Volume
55
Issue
2
Start / End Page
371 / 406
Related Subject Headings
- Accounting
- 3502 Banking, finance and investment
- 3501 Accounting, auditing and accountability
- 1502 Banking, Finance and Investment
- 1501 Accounting, Auditing and Accountability