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The effect of bank governance on borrowers' accounting choices
- Authors
- Hur, Kang Sung; Hwang, In Tae
- Issue Date
- Nov-2023
- Publisher
- ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
- Keywords
- Appointment structure; bank governance; earnings management; borrower; discretionary accruals
- Citation
- ASIA-PACIFIC JOURNAL OF ACCOUNTING & ECONOMICS, v.30, no.6, pp 1417 - 1443
- Pages
- 27
- Journal Title
- ASIA-PACIFIC JOURNAL OF ACCOUNTING & ECONOMICS
- Volume
- 30
- Number
- 6
- Start Page
- 1417
- End Page
- 1443
- ISSN
- 1608-1625
2164-2257
- Abstract
- This study analyzes the effect of bank CEO appointment structure and tenure on borrowers' accounting practices and earnings management. Drawing on agency theory, we posit that agency costs are high for banks that frequently change CEOs and those that appoint CEOs from external sources. The results indicate firms that borrow from banks with high agency costs adopt less conservative accounting practices and employ real activities earnings management when deteriorating management conditions lead to negative cash flow. This study provides a strong empirical foundation for future research by verifying that appointment structure and tenure of bank CEOs affect borrowers' accounting choices.
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