Accounting Seminar（2019-10）

Topic: Institutional Lenders, Trading Incentives, and Corporate Disclosure

Speaker: Lin Cheng, The University of Arizona

Time: Thursday, June 20th, 10:00-11:30 a.m

Place: Room 217, Guanghua Building 2

Abstract:

This study examines the influence of institutional lenders, whose portfolios hold both loans and equity securities, on firms’ public and private disclosures. Using mergers between an institutional shareholder and a lender of the same firms as an exogenous shock to the existence of institutional lenders, we document that after the mergers, firms are less likely to provide management forecasts and disclose fewer voluntary 8-K items. Meanwhile, through contractual provisions, these firms provide more private disclosure such as internal projections and monthly financial statements to their institutional lenders. In addition, we find that the results are more pronounced for firms whose stocks are more actively traded by their institutional lenders and that institutional lenders make more profitable trades on firms who withhold public disclosures. Overall, our results suggest that institutional lenders strategically influence firms’ public and private disclosures to maintain and enhance their information advantage and profit from it in the equity market.

Introduction:

Dr. Lin Cheng is an Associate Professor of Accounting at School of Accountancy at The University of Arizona. He joined The University of Arizona in 2012 as an Assistant Professor of Accounting after receiving his PhD in Accounting & MIS from The Ohio State University.

Dr. Cheng has published multiple articles in leading scholarly accounting journals, including The Accounting Review, Journal of Accounting and Economics, and Contemporary Accounting Research. He conducts research on various financial reporting and disclosure issues, including the design of loan contracts and the usefulness of accounting information in debt contracting. His research also examines the effects of regulatory changes, product market competition, and different stakeholders on firms’ disclosure practices.

Dr. Cheng teaches financial accounting and reviews regularly for top scholarly journals, including The Accounting Review, Contemporary Accounting Research, and Management Science. He is a member of American Accounting Association (AAA) and Chinese Accounting Professors’ Association of North America (CAPANA).

Your participation is warmly welcomed!