Weekly Departmental Seminar- EnvironmentalEconomics and Management
Date: 6.3.22
Speaker: NadavSteinberg
Affiliation: The Bank of Israel
Bio: Dr. Nadav Steinberg is a senior economistat the Bank of Israel.
Subject: Creditor rights, implicitcovenants, and the quality of accounting information
Abstract: We study a 2013 court decision that enhanced creditor control rights inIsrael by allowing creditors to force companies whose liabilities exceed theirassets (i.e., their net worth is negative) into bankruptcy. Following theruling, we observe a pronounced increase in the reported net worth of the firmsaffected by it. We show that this change in net worth is related to changes inthe accounting policies of affected firms: An increase in the use of long-termdiscretionary accruals and a decrease in adherence to the principle ofaccounting conservatism. As a result of these accounting changes, we document adecline in the informativeness of the affected firms’ financial reports. Weconclude that the benefits from empowering creditors may be mitigated byunintended consequences – incentives for borrowing firms to use accountingpractices in order to present an optimistic view of their financial condition.The resulting reduction in the quality of information available to bondholdersmay adversely affect financial markets.
Joint workwith: Assaf Hamdani, Yevgeny Mugerman, Ruth Rooz and Yishay Yafeh
The online meeting will be held on Sunday, March6th , 2022 at 13:15.
הצטרפות Zoom Meeting
https://huji.zoom.us/j/82662005810?pwd=MUdqTENlaFNFRW83d1QvVVQ4czFpdz09 (מזהה: 82662005810, קוד סיסמה: 249427)
הצטרפות דרך הטלפון
(US) +1 669-900-6833 (קוד סיסמה: 249427)
הוראות הצטרפות: https://www.google.com/url?q=https://applications.zoom.us/addon/invitati...
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Meeting host: abigail.hurwitz@mail.huji.ac.il