Abstract
We empirically investigate the effects of accounting information quality, as measured by accruals quality, on the use of government guaranteed loans, which we regard as a form of transaction lending. We find that higher accruals quality is associated with higher usage rates of government guaranteed loans, but not with those of nonguaranteed loans, which we consider to constitute relationship lending within the Japanese context. We also find that higher accruals quality is not related to the interest rate for guaranteed loans, but rather is associated with a lower interest rate for nonguaranteed loans. These results indicate that the relevant accounting information is effectively used in screening processes for small- and medium-sized enterprises (SMEs), but that effectiveness varies, depending on the particular lending technology employed.
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