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| Author: | Frantz, P. |
| Title: | Discretionary accounting choices: A debt-covenants based signalling approach |
| Journal: | Accounting and Business Research
1997 : SPRING, VOL. 27:2, p. 99-110 |
| Index terms: | ASYMMETRIC INFORMATION SHAREHOLDERS MANAGERS SIGNALING |
| Language: | eng |
| Abstract: | This study provides a debt covenants-based explanation for the discretionary accounting choices such as the choices of accounting procedures made by managers in a world in which managers are endowed with private information about their firms' future earnings. It considers of a firm whose capital structure consists of both equity and debt, a manager who protects the interests of the firm's shareholders , and a financial market. The study illustrates through the selection of a depreciation method how managers may credibly communicate their private information through discretionary accounting choices. |
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