Political Capital vs. Constraint: Evidence from CEO Turnovers in Chinese Private Firms

This paper investigates whether and at what extent private firms reduce the quality of their accruals in order to signal a better portrait to the bank and obtain new or larger bank loans. We measure earnings discretionary accruals of a sample of Italian private firms, testing whether new and larger bank loans are associated with a higher (lower) quality of earnings in borrowers' financial reporting. We study bank loan levels and changes and how they impact discretionary accruals and found that, surprisingly, private firms' discretionary accruals are systematically positively affected by an increase in bank loans, although they are negatively affected by the credit worthiness rating assigned to the borrowers. We find that the monitoring role of the banking system with regard to the adoption of discretionary accruals is effective only when the loan is very large. This paper may have implications for policy-makers as it contributes to the understanding of the shortcomings of the banking regulatory system. This is an extremely relevant issue since the excessive amount of non-performing loans held by Italian banks recently threatened the stability of the European Banking Union as a whole.

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Combast with SARS-COV-2 Virus, COVUID-19 Pandemic

Medical & Clinical Research ◽

10.33140/mcr.05.015 ◽

2020 ◽

Vol 5 ◽

Keyword(s):

Health Facilities ◽

Political Capital ◽

Economic Power ◽

Biological Chemistry ◽

The World

Department of Biological Chemistry, Ariel University, 40700 Ariel, Israel. The currently roaring corona pandemic can be seen as a leading event in the deadly outbreak controlling the various health facilities and hospitals for years. The nosocomial microbial epidemic kills thousands of people every year in Israel around the world. Hygiene is the culprit for these fatal diseases [1]. And now it seems that the politicians, in macup to take care of the eradication of the disease-causing microbe, are taking advantage of the situation for the purpose of accumulating political capital and additional economic power. There is no escape from fighting the virus and tanning that bring about its reproduction, strengthening and transformation.

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