Usefulness of Financial Accounting Information in Commercial Lending : By Banks in Sweden

Abstract: Recent research has focused more on the needs and usage of accounting information in favor of its investors. Hence, there has been less attention towards creditors’ information needs. Additionally, it has been criticized that accounting information has lost its relevance to its users (Francis & Schipper 1999; Hail 2013). As Allen and Cote (2005) stated, it is hard to make any improvements to financial reporting if creditors’ decision making behavior is not well investigated. Thus, the aim of this research is to narrow the gap between studies concerning the information needs and usefulness of accounting information among creditors and investors. In addition, the companies in Sweden are financing their operation by issuing debt rather than equity, which increases the importance to consider creditors’ information needs, and how useful accounting information is to them (Billings & Morton 2002; Ewing & Bhatia 2012). The data was collected through questionnaire surveys which were sent out to the branch managers of the biggest commercial banks in Sweden. The questionnaire was mainly based on questions that used five point likert-scale. Additionally, a few open questions were included. Overall, the results of this thesis indicate the consistency with recent research. The importance of accounting information is significant, and practically all three main statements; balance sheet, income statement and cash flow statement, can be regarded to be complementary. An obvious difference is in the usage of financial statements compared to other information sources, as respondents claim to use accounting information nearly all the time when other sources were significantly less used.