Two minds of credit professionals: accrual vs. cash accounting information

Abstract

To explore in what ways and what elements of financial statement information is important for credit practitioners, we employ a survey method to obtain new evidence. We ask if there is evidence on the existence of two different types of views to accounting information, namely accrual accounting and cash accounting emphasis. The two views come out robustly throughout our analysis, and they are consistently linked both to credit professional's experience, and task complexity. We infer our evidence to be consistent with the explanations for co-existence of differential information preferences advanced in behavioural accounting literature related to individuals' cognitive constraints in use of accounting information. We discuss the implications of our results for credit professionals, accounting standard setters and researchers.