Accounting Information Quality and Government Guaranteed Loans: Evidence from Japanese SMEs

Author Name Hyonok KIM  (Tokyo Keizai University) /YASUDA Yukihiro  (Hitotsubashi University)
Creation Date/NO. December 2015 15-E-138
Research Project Study on Corporate Finance and Firm Dynamics
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We empirically investigate the effects of accounting information quality, as measured by accruals quality, on the use of government guaranteed loans, which we regard as a form of transaction lending. We find that higher accruals quality is associated with higher use rates of government guaranteed loans, but not associated with use rates of nonguaranteed (i.e., regular) loans, which we consider to constitute relationship lending within the Japanese context. We also find that higher accruals quality is not related to the interest rate for guaranteed loans, but is associated with a lower interest rate for nonguaranteed loans. These results indicate that the relevant accounting information is effectively used in the screening processes for small and medium-sized enterprises (SMEs), but that the effectiveness varies depending on the particular lending technology employed.