The effect of SME reporting framework and credit risk on lenders' judgments and decisions

摘要: Abstract Small and medium-sized entities have a number of reporting framework alternatives when preparing financial statements for users, including new AICPA designed specifically such businesses as cost-effective alternative to traditional GAAP. However, little is known about whether choice affects users’ assessments quality subsequent business decisions. This study evaluates the effects type credit risk on lenders’ judgments Specifically, we evaluate 157 likelihood loan approval prospective borrower in an experiment that manipulates (FASB-based GAAP, AICPA’s Financial Reporting Framework Medium-Sized Entities, or tax-basis) level (high low) randomly between subjects. The results indicate significant interaction applicant level. find lenders evaluating GAAP-based report higher lower interest rate than considering prepared using other frameworks, particularly applicant’s high. Mediation analysis provides evidence perceived explains framework-approval results. also suggest viable GAAP low. We consider study’s implications policy, practice, research.