Abstract
This paper investigates whether the usefulness of accounting profitability in debt contracts changes after the adoption of the new Chinese accounting standards (“NCAS”) in 2007. We find that the sensitivity of new debts to accounting profitability declines after the adoption and that firms are heavily influenced by the adoption of the new accounting standards and experience a more significant decrease in sensitivity. Moreover, such a decrease in sensitivity is more pronounced for non-state-owned companies than for state-owned companies. Overall, our results indicate that the usefulness of accounting profitability decreases after the adoption of the new accounting standards.
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We are grateful to the executive editor, the two anonymous reviewers, and participants at the Fudan Accounting Forum for their comments and suggestions. Hongqi Yuan would like to thank the National Natural Science Foundation of China (70472079) for providing financial support. Yubo Li appreciates the financial support provided by the Shanghai Young Scholar Development Plan and Innovation Fund of Shanghai University.
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Yuan, H., Li, Y., Lou, F. et al. New Chinese Accounting Standards and the Usefulness of Accounting Information in Debt Contracts. China Account Financ Rev 15, 3 (2013). https://doi.org/10.7603/s40570-013-0003-x
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DOI: https://doi.org/10.7603/s40570-013-0003-x