The Impact of FASB Staff Position APB 14-1 on Corporate Financing: A Debt Contracting Perspective

Using a set of hand-collected data, we study the economic consequences of FASB Staff Position APB 14-1, which was adopted in 2008 and intended to increase reported interest expense and decrease reported leverage. First, we document that issuers are more likely to respond to APB 14-1 by reducing the outstanding amount of cash-settled convertible debt when they are more able to bear the cost of repurchase. Second, we explore the debt contracting …