Conditional Conservatism, Agency Costs, and the Contractual Features of Debt

Persistent Link:
http://hdl.handle.net/10150/193780
Title:
Conditional Conservatism, Agency Costs, and the Contractual Features of Debt
Author:
Lee, Hye Seung
Issue Date:
2010
Publisher:
The University of Arizona.
Rights:
Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
Abstract:
In this paper, I examine the effects of debt structure on conservatism. The analysis is conducted in two steps. First, I examine the direction of causality between capital structure and conditional conservatism by using a unique sample of zero leverage firms that transition to non-zero leverage. Also I investigate whether off-balance-sheet leverage incrementally explains conditional conservatism. Second, I study whether the various characteristics of debt also affect conditional conservatism. Specifically, the characteristics I investigate include: (1) whether the debt is public or private, (2) maturity, (3) convertibility, (4) seniority, and (5) securitization. Since these different characteristics of debt affect agency costs to varying degrees, I predict that differences in the type of debt will lead to cross-sectional differences in conditional conservatism. I find that entering the debt market is an important factor driving demand for conditional conservatism, and that off-balance-sheet leverage incrementally increases conditional conservatism relative to on-balance-sheet leverage. Consistent with my predictions, I find that firms with greater levels of public debt, short-term debt, subordinate debt, and unsecured debt provide more timely loss recognition. After controlling for the likelihood of conversion, I also find firms with a greater level of convertible debt provide less timely loss recognition. Overall my results indicate that accounting conservatism not only varies with the presence of debt, but also with the contractual features of debt.
Type:
text; Electronic Dissertation
Keywords:
Agency costs; Characteristics; Conservatism; Debt
Degree Name:
Ph.D.
Degree Level:
doctoral
Degree Program:
Accounting; Graduate College
Degree Grantor:
University of Arizona
Committee Chair:
Dhaliwal, Dan S.

Full metadata record

DC FieldValue Language
dc.language.isoENen_US
dc.titleConditional Conservatism, Agency Costs, and the Contractual Features of Debten_US
dc.creatorLee, Hye Seungen_US
dc.contributor.authorLee, Hye Seungen_US
dc.date.issued2010en_US
dc.publisherThe University of Arizona.en_US
dc.rightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.en_US
dc.description.abstractIn this paper, I examine the effects of debt structure on conservatism. The analysis is conducted in two steps. First, I examine the direction of causality between capital structure and conditional conservatism by using a unique sample of zero leverage firms that transition to non-zero leverage. Also I investigate whether off-balance-sheet leverage incrementally explains conditional conservatism. Second, I study whether the various characteristics of debt also affect conditional conservatism. Specifically, the characteristics I investigate include: (1) whether the debt is public or private, (2) maturity, (3) convertibility, (4) seniority, and (5) securitization. Since these different characteristics of debt affect agency costs to varying degrees, I predict that differences in the type of debt will lead to cross-sectional differences in conditional conservatism. I find that entering the debt market is an important factor driving demand for conditional conservatism, and that off-balance-sheet leverage incrementally increases conditional conservatism relative to on-balance-sheet leverage. Consistent with my predictions, I find that firms with greater levels of public debt, short-term debt, subordinate debt, and unsecured debt provide more timely loss recognition. After controlling for the likelihood of conversion, I also find firms with a greater level of convertible debt provide less timely loss recognition. Overall my results indicate that accounting conservatism not only varies with the presence of debt, but also with the contractual features of debt.en_US
dc.typetexten_US
dc.typeElectronic Dissertationen_US
dc.subjectAgency costsen_US
dc.subjectCharacteristicsen_US
dc.subjectConservatismen_US
dc.subjectDebten_US
thesis.degree.namePh.D.en_US
thesis.degree.leveldoctoralen_US
thesis.degree.disciplineAccountingen_US
thesis.degree.disciplineGraduate Collegeen_US
thesis.degree.grantorUniversity of Arizonaen_US
dc.contributor.chairDhaliwal, Dan S.en_US
dc.contributor.committeememberDhaliwal, Dan S.en_US
dc.contributor.committeememberTrombley, Mark A.en_US
dc.contributor.committeememberBens, Dan A.en_US
dc.identifier.proquest10898en_US
dc.identifier.oclc659753821en_US
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