Affiliated bankers on board and conservative accounting

  title={Affiliated bankers on board and conservative accounting},
  author={David H. Erkens and K. R. Subramanyam},
We examine the effect of lending banks’ board representation (affiliated banker on board, or AFB) on conservative accounting. We argue that private information obtained through board representation enhances the monitoring and the influence of lenders and therefore reduces their demand for conservatism-facilitated debt contracting. Consistent with our hypothesis, we find that conservatism is markedly lower for AFB firms, even after controlling for a variety of confounding effects. In addition we… CONTINUE READING
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