The effect of borrowers' accounting conservatism on lenders' loan loss provisions: Evidence from China's banking industry
研究了中国银行业中借款人会计稳健性如何影响银行的贷款损失准备金，发现借款人财务报告越稳健，银行计提的准备金越多，且信息不对称时影响更显著。
This paper investigates how borrowers' accounting conservatism affects lenders' loan loss provisions in the Chinese banking context. We predict that when borrowers' financial statements are more conservative, lenders receive borrowers' bad news in a timelier manner and set aside more loan loss provisions. The empirical results confirm that borrowers' accounting conservatism is positively associated with lenders' loan loss provisions, as the former affects the latter via its impact on loan classification, and this positive association is more pronounced when information asymmetry is higher. In heterogeneity tests, we find that this positive association is stronger for non-state-owned, listed, and less prudent lenders and also varies across debt contract characteristics. Collectively, the results of this study offer insights into how lenders accrue loan losses when borrowers' financial reporting is more conservative.