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Accounting Quality and Debt Concentration: Evidence from Internal Control Weakness Disclosures
- Publication Year :
- 2014
- Publisher :
- HAL CCSD, 2014.
-
Abstract
- This paper examines how accounting quality affects the degree of debt concentration in corporate capital structures (i.e., a firm’s tendency to predominantly rely on only a few types of debt). Motivated by theoretical and empirical research that supports a strong link between creditors’ coordination costs and debt concentration and the importance of accounting quality in reducing these coordination costs, we hypothesize that firms with low accounting quality have a more concentrated debt structure. Measuring financial reporting quality by the disclosure of material internal control weaknesses over financial reporting (ICWs), we find that ICWs lead to a significantly more concentrated debt structure. We also show that the effect of ICWs on the degree of debt concentration is stronger for more severe ICW disclosures and for firms with a higher credit risk, further reinforcing the importance of financial reporting quality in determining debt concentration.
- Subjects :
- Weakness
business.industry
Creditor
media_common.quotation_subject
Control (management)
education
Accounting
humanities
Empirical research
Capital (economics)
Debt
medicine
[SHS.GESTION]Humanities and Social Sciences/Business administration
Quality (business)
medicine.symptom
business
health care economics and organizations
media_common
Credit risk
Subjects
Details
- Language :
- English
- Database :
- OpenAIRE
- Accession number :
- edsair.doi.dedup.....41f0401944e1656b86c79d562fa7c8c5