Accounting conservatism and the cost of bank credit in Brazil

• Autor(a) principal: Brito, Giovani Antonio Silva
• Data de Publicação: 2013
• Outros Autores: Martins, Eliseu
• Tipo de documento: Artigo
• Idioma: eng; por
• Título da fonte: BBR. Brazilian Business Review (English edition. Online)
• Texto Completo: http://www.bbronline.com.br/index.php/bbr/article/view/232
• topic: Accounting; conservatism; bank credit; cost of capital; Contabilidade; conservadorismo; crédito bancário; custo de capital

This study investigates whether the adoption of conservative accounting practices leads to a reduction of the cost of bank credit for Brazilian companies. The study is based on a sample of 1,300 firms and 813 thousand loan contracts, in the period from 2000 to 2009. We used models that associated the cost of credit to measures of conservatisms and a set of control variables. We did not obtain any statistically significant evidence of a relationship between the conservatism measures and the interest rates charged on bank loans, confirming the research hypothesis. The Brazilian institutional environment of weak legal protection of creditors and the low demand for good-quality accounting information restrict the benefits generated by conservatism and cause lenders not to stimulate the adoption of conservative practices by companies, by lowering their interest rates. Since companies do not perceive benefits associated with reporting conservative numbers, the use this practice is restricted in Brazil.