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[Research]Bank Relationships and the Value Relevance of the Income Statement: Evidence from Income-Statement C
2007.09.10 Views 1158 경영학연구분석센터
Journal of Business Finance and Accounting
Volume 34, Issue 7-8, September-October 2007, Pages 1051–1072
Wooseok Choi,
Korea University Business School, Anam-Dong Seongbuk-Gu, Seoul, Korea 136-701. e-mail: choiw@korea.ac.kr
http://onlinelibrary.wiley.com/doi/10.1111/j.1468-5957.2007.02023.x/abstract
Abstract
This study examines the effects of a firm's debt financing decision on the informativeness of the income statement. This study specifically examines the association between a firm's bank dependence and the value relevance of the income statement by investigating the income-statement conservatism of firms with bank loans. Focusing on relatively small businesses, this study finds that income-statement conservatism, measured as timely loss recognition, is increasing in a firm's bank dependence. This study also finds that the value relevance of the income statement is increasing in a firm's bank dependence. The findings of this paper suggest that the usefulness of the income statement varies with a firm's bank dependence, indicating that the value relevance of the income statement is a function of a firm's debt financing decision. The findings further suggest that bank relationships affect the value relevance of the income statement through their influence on income-statement conservatism.
Volume 34, Issue 7-8, September-October 2007, Pages 1051–1072
Wooseok Choi,
Korea University Business School, Anam-Dong Seongbuk-Gu, Seoul, Korea 136-701. e-mail: choiw@korea.ac.kr
http://onlinelibrary.wiley.com/doi/10.1111/j.1468-5957.2007.02023.x/abstract
Abstract
This study examines the effects of a firm's debt financing decision on the informativeness of the income statement. This study specifically examines the association between a firm's bank dependence and the value relevance of the income statement by investigating the income-statement conservatism of firms with bank loans. Focusing on relatively small businesses, this study finds that income-statement conservatism, measured as timely loss recognition, is increasing in a firm's bank dependence. This study also finds that the value relevance of the income statement is increasing in a firm's bank dependence. The findings of this paper suggest that the usefulness of the income statement varies with a firm's bank dependence, indicating that the value relevance of the income statement is a function of a firm's debt financing decision. The findings further suggest that bank relationships affect the value relevance of the income statement through their influence on income-statement conservatism.