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

Title data

Fülbier, Rolf Uwe ; Gassen, Joachim:
Do creditors prefer smooth earnings? : Evidence from European private firms.
In: Journal of International Accounting Research. Vol. 14 (2015) Issue 2 . - pp. 151-180.
ISSN 1558-8025
DOI: https://doi.org/10.2308/jiar-51130

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Abstract in another language

We investigate the interplay between creditor financing and the smoothness of earnings reported by European private firms, and document how heterogeneous debt-contracting infrastructures across Europe moderate this relation. We expect the smoothness of earnings to be positively related to the relative importance of credit providers in our setting. More importantly, we predict this relation to be more pronounced in regimes with higher bankruptcy and contract enforcement costs. Finally, we hypothesize that earnings smoothness is negatively related to the cost of debt of our sample firms. Our large-sample empirical evidence confirms our expectations. While the cross-sectional nature of our setting limits our potential to address endogeneity concerns and, thus, caution is required when interpreting our findings in a causal way, they are consistent with the accounting of European private firms being shaped by creditor incentives and with this link being moderated by the country-level efficiency of the debt-contracting infrastructure.

Further data

Item Type: Article in a journal
Refereed: Yes
Additional notes: Journal of International Accounting Research Vol. 14 (2015) ISSN 1542-6297 forthcoming
Keywords: cost of debt; debt contracting; earnings smoothness; European private firms
Subject classification: Journal of Economic Literature: M41
Institutions of the University: Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Business Administration
Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Chair Business Administration X - International Financial Reporting
Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Chair Business Administration X - International Financial Reporting > Chair Business Administration X - International Financial Reporting - Univ.-Prof. Dr. Rolf Uwe Fülbier
Profile Fields
Profile Fields > Emerging Fields
Profile Fields > Emerging Fields > Governance and Responsibility
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 11 Jan 2016 13:00
Last Modified: 11 Jan 2016 13:00
URI: https://eref.uni-bayreuth.de/id/eprint/29640

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