Internal Governance Structure, Accounting Information Quality And Credit Financing Availability

Existing literatures show that the accounting information is most frequently used in making credit decision. The use of accounting information can reduce the asymmetry of information between banks and enterprises. But the manipulation in corporation accounting greatly reduces the quality of accounting information, and then undermines its usefulness of credit decision-making. In this paper, we have focused the SMEs Board from 2004 to 2007 as the research object, and then studied the relationship between the quality of accounting information and the credit policy. Our results show that, though the quality of accounting information is different among SMEs, there is no significant difference in the relativity between credit availability and accounting. In other words, those banks can not identify the SMEs'accounting manipulation effectively.However, different corporate governance structure will take effect in different management accounting practices, and then affect the quality of accounting information. Thereby this article further takes the empirical test in studying the relation between the internal governance and the usefulness of accounting information in credit. The results show that, our banks ignore the judgment on the governance structure of debtor in the process of credit decision-making, which makes the internal governance structure could not effectively promote the usefulness of accounting information in credit, thus it can not play its proper role in mitigating the asymmetry of information.In conclusion, we demonstrate that banks should be positively concerned about the internal governance structure, and identify the quality of accounting information effectively, in order to make the optimum credit decision.