We study the impact of accounting quality on financial contracting by examining the price and non-price features of loan contracts at the time of loan origination. Borrower accounting quality, measured using standard models of unsigned abnormal accruals, has a significant economic impact on the loan contract terms. Lower accounting quality borrowers face substantially higher loan spreads (17 to 23 percent higher than the average interest cost). Simultaneously, lower accounting quality borrowers also face stricter non-price contract terms for loan maturity (6 percent lower) and collateral (11 percent higher probability). Loan transaction costs are significantly higher for lower accounting quality borrowers with higher upfront fees (16 to 37 percent higher) and higher annual fees (50 percent higher) for the lowest accounting quality borrowers. The results remain robust after controlling for a variety of known proxies for loan default risk and alternative econometric specifications. Additional tests show that loan terms exhibit a "U-shaped " pattern with respect to signed abnormal accruals, with firms having high positive or negative abnormal accruals facing the most stringent loan terms. We hypothesize that poor accounting quality reflects limite
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