Management earnings forecasts and bank loan contracting

Tien Shih Hsieh, Byron Y SONG, Ray R WANG*, Xinlu Wang

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    13 Citations (Scopus)


    We find that firms tend to issue management earnings forecasts and convey good news before bank loan initiation. Issuing firms enjoy more favorable contracting terms and attract more lenders. Management forecasts issuance within a nine-month period prior to the loan activating quarter can lower the subsequent loan spread by 14.06 basis points. Moreover, firms with larger management forecast errors are charged harsher contracting terms and attract fewer lenders. Our study suggests that firms strategically issue management earnings forecasts before entering into debt contracts and lenders incorporate the information contained in management earnings forecasts into bank loan contracting.

    Original languageEnglish
    Pages (from-to)712-738
    Number of pages27
    JournalJournal of Business Finance and Accounting
    Issue number5-6
    Publication statusPublished - 1 May 2019

    Scopus Subject Areas

    • Accounting
    • Business, Management and Accounting (miscellaneous)
    • Finance

    User-Defined Keywords

    • bank loan contracting
    • good news
    • management earnings forecast
    • management forecast errors
    • voluntary disclosure


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