TY  - JOUR
AU  - Graham,John R.
AU  - Li,Si
AU  - Qiu,Jiaping
TI  - Corporate Misreporting and Bank Loan Contracting
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13708
PY  - 2007
Y2  - December 2007
UR  - http://www.nber.org/papers/w13708
L1  - http://www.nber.org/papers/w13708.pdf
N1  - Author contact info:
John Graham
Duke University
Fuqua School of Business
100 Fuqua Drive
Durham, NC 27708-0120
Tel: 919/660-7857
Fax: 919/660-8038
E-Mail: john.graham@duke.edu

Si Li
School of Business and Economics
Wilfrid Laurier University
Waterloo, ON
N2L 3C5, Canada
E-Mail: sli@wlu.ca

Jiaping Qiu
DeGroote School of Business
McMaster University
Hamilton, ON
L8S 4M4, Canada
E-Mail: qiu@mcmaster.ca
AB  - This paper is the first to study the effect of financial restatement on bank loan contracting. Compared with loans initiated before restatement, loans initiated after restatement have significantly higher spreads, shorter maturities, higher likelihood of being secured, and more covenant restrictions. The increase in loan spread is significantly larger for fraudulent restating firms than other restating firms. We also find that after restatement, the number of lenders per loan declines and firms pay higher upfront and annual fees. These results are consistent with the view that banks use tighter loan contract terms to overcome risk and information problems arising from financial restatements.
ER  -