Corporate misreporting and bank loan contracting

Published

Journal Article

This paper is the first to study the effect of financial restatement on bank loan contracting. Compared with loans initiated before restatement, loans initiated after restatement have significantly higher spreads, shorter maturities, higher likelihood of being secured, and more covenant restrictions. The increase in loan spread is significantly larger for fraudulent restating firms than other restating firms. We also find that after restatement, the number of lenders per loan declines and firms pay higher upfront and annual fees. These results are consistent with banks using tighter loan contract terms to overcome risk and information problems arising from financial restatements. © 2008 Elsevier B.V. All rights reserved.

Full Text

Duke Authors

Cited Authors

  • Graham, JR; Li, S; Qiu, J

Published Date

  • July 1, 2008

Published In

Volume / Issue

  • 89 / 1

Start / End Page

  • 44 - 61

International Standard Serial Number (ISSN)

  • 0304-405X

Digital Object Identifier (DOI)

  • 10.1016/j.jfineco.2007.08.005

Citation Source

  • Scopus