Does Information Technology Reputation Affect Bank Loan Terms?

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Detail(s)

Original languageEnglish
Pages (from-to)185-211
Journal / PublicationThe Accounting Review
Volume93
Issue number3
Online publishedOct 2017
Publication statusPublished - May 2018

Abstract

This study investigates whether Information Technology (IT) reputation, captured by the accumulation of consistent IT capability signals, influences bank loan contracting even though banks have access to inside information. We predict that IT reputation is associated with better loan terms because it lowers credit risk via its impact on default and information risks. Results based on 4,218 loan facility-years reveal, as predicted, that firms with a reputation for IT capability tend to have more favorable price and non-price terms for loan contracts and are less likely to have their credit rating downgraded or to report internal control weaknesses than firms with no IT reputation. The study contributes to the banking and IT business value literature by showing that banks incorporate borrowers' nonfinancial characteristics, such as IT reputation, into loan contracting terms.

Research Area(s)

  • IT reputation, bank loans, singaling theory, default risk, Information risk

Bibliographic Note

Research Unit(s) information for this publication is provided by the author(s) concerned.

Citation Format(s)

Does Information Technology Reputation Affect Bank Loan Terms? / Kim, Jeong-Bon; Song, Byron Y.; Stratopoulos, Theophanis C.

In: The Accounting Review, Vol. 93, No. 3, 05.2018, p. 185-211.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review