Banking Practices and Borrowing Firms' Financial Reporting: Evidence from Bank Cross-Selling

摘要

This dissertation studies whether banking practices affect borrowing firms' financial reporting. Specifically, I examine the effect of bank cross-selling activities (i.e., a bank's joint provisions of lending and underwriting services to the same firm) on borrowers' financial reporting quality for debt contracting. Cross-selling enhances lenders' monitoring incentives because banks face additional reputational risks associated with underwriting services. In addition, cross-selling improves lenders' monitoring abilities because information sharing between the underwriting and the lending divisions enables them to better discipline borrowers' financial reporting for debt contracting purposes. Consistent with these arguments, I show that cross-selling is associated with an improvement in the debt contracting value (DCV) of accounting information at borrowing firms. I also find that banks use more accounting-based monitoring mechanisms for loans cross-sold with underwriting services than for other comparable loans. These findings are robust to alternative identification strategies.