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Do creditors prefer smoother earnings? : Evidence from European private firms

Title data

Gassen, Joachim ; Fülbier, Rolf Uwe:
Do creditors prefer smoother earnings? : Evidence from European private firms.
2014
Event: Second International Conference of the Journal of Accounting Research (JIAR) , 6.-7. Juni 2014 , Hong Kong.
(Conference item: Conference , Paper )

Official URL: Volltext

Abstract in another language

We investigate the interplay between
creditor financing and the smoothness of
earnings reported by European private firm
s and document how heterogeneous debt-
contracting infrastructures across Europe mode
rate this relation. Most European private
firms are owner-manager run enterprises with
private creditors as central outside stake-
holders. In this setting we expect the smoot
hness of earnings to be positively related to
the relative importance of these stakeholders.
More importantly, we expect this relation to
be more pronounced in regimes where bankruptcy and contract enforcement costs are
higher. Finally, we hypothesize
that earnings smoothness is rela
ted negatively to the cost
of debt of firms in these countries. Our la
rge-sample empirical evidence confirms our
expectations. Our findings are consistent w
ith the accounting of European private firms
being shaped by creditor incentives and speak
to the current regulatory debate about har-
monizing the accounting standards for private firms.

Further data

Item Type: Conference item (Paper)
Refereed: Yes
Additional notes: SSRN-id2496791
Keywords: earnings smoothness; debt contracting; capital structure; leverage; cost of
debt; accounting incentives; earnings attributes; trade credit; European private firms
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Chair Business Administration X
Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Chair Business Administration X > Chair Business Administration X - Univ.-Prof. Dr. Rolf Uwe Fülbier
Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Business Administration
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 08 Jan 2015 11:22
Last Modified: 13 Apr 2015 09:52
URI: https://eref.uni-bayreuth.de/id/eprint/5408