Abstract
ABSTRACT Listed companies in China have provided large numbers of loan guarantees for borrowers in recent years. The loan guarantee size of A-share Main Board listed companies was about RMB 3.85 trillion at the end of 2017. On the one hand, loan guarantees help borrowers access debt financing, which promotes the development of capital markets. On the other hand, however, loan guarantees can increase the financial risks for guarantors. This study investigates the effects of loan guarantees on guarantors’ accounting conservatism. Based on a large sample of listed companies from 2007 to 2017, we find that loan guarantees have a significant positive effects on guarantors’ accounting conservatism. When firms provide loan guarantees for borrowers, they report more conservative accounting information. Moreover, the effect of loan guarantees on accounting conservatism varies by borrower. Listed companies report more conservative accounting information when they provide guarantees for non-subsidiaries rather than for subsidiaries. Among the companies providing guarantees for non-subsidiaries, the companies engage in higher levels of accounting conservatism when they guarantee the borrowing of controlling shareholders instead of the borrowing of non-controlling shareholders.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
