HCBE Faculty Articles
Title
The Dynamics of Borrower Reputation Following Financial Misreporting
Document Type
Article
Publication Date
10-2018
Publication Title
Management Science
ISSN or ISBN
1526-5501
Volume
64
Issue/Number
10
First Page
4775
Last Page
4797
Abstract/Excerpt
We study the dynamics of borrower reputation in bank loan markets following revelations of financial misreporting by the borrower. Misreporting firms pay greater loan spreads than matched firms for at least six years following revelation of the misreporting, and there is no evidence of a downward trend in the misreporting premium. Following revelation, misreporting firms are more likely to engage in various actions to potentially rebuild their reputations, but even firms that engage in multiple actions continue to pay greater loan spreads for at least six years. Our results suggest that misreporting causes long-lasting and costly reputation losses that firms find very difficult or prohibitively costly to restore.
DOI
10.1287/mnsc.2017.2739
NSUWorks Citation
Chava, Sudheer; Huang, Kershen; and Johnson, Shane A., "The Dynamics of Borrower Reputation Following Financial Misreporting" (2018). HCBE Faculty Articles. 1031.
https://nsuworks.nova.edu/hcbe_facarticles/1031
