Quality of Accounting Information, Executives’ Background and Loans of Small and Medium-Sized Enterprises

Abstract

Small and medium-sized enterprises (SMEs) in China are currently still facing serious lending constraints, especially long-term loan constraints. This paper empirically studies on how the accounting information quality and executives’ background of SMEs influence their credit availability and loan term structures. We use panel data from 2010 to 2015 of Chines SMEs financial report database, matched with the executive characteristic database. The findings suggest that with better accounting information quality or the executives’ financial or political background, SMEs’ short-term credit availability can be improved. Furthermore, the impact of executives’ financial background is the largest. As for the long-term credit availability, the quality of accounting information plays a more important role than the executives’ background. In addition, the interaction between quality of accounting information and executives’ background on SMEs’ credit availability varies in different terms of loans, showing supplementary effect for short-term loans and substitute effect for long-term loans.