Differential Reporting and the Effect on Loan Evaluations: An Experimental Study

This study utilises a mixed design laboratory experiment to test the impact of differential reporting on one group of external financial report users— lenders. The results indicate that the judgments of bank loan officers’ assessment of the ability of a borrower to repay, are not significantly affected by differential reporting (in this case, presentation of non‐GAAP financial reports compared to GAAP financial reports). However, bankers request additional information from borrowers when non‐GAAP financial reports are presented.