Recent evidence suggests that investors struggle to process complex financial disclosures. Relative to equity and public debt investors, banks have unique advantages in acquiring information and can impose contractual terms to mitigate information frictions. We investigate whether financial statement complexity is associated with firms' reliance on bank financing and the terms of bank loans. We focus on two aspects of complexity, the length of financial reports and the complexity of financial reporting rules. We document that both aspects of complexity are positively associated with firms' reliance on bank financing (i.e., level of debt and new financing). This result is consistent with banks' superior information processing capabilities. Next, we document that banks ameliorate information frictions using loan contractual terms that depend on the source of complexity. Overall, banks are an attractive source of financing for firms with complex disclosures, but banks also increase screening and monitoring for relatively complex borrowers.

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Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing this collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden to Department of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports (0704-0188), 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302. Respondents should be aware that notwithstanding any other provision of law, no person shall be subject to any penalty for failing to comply with a collection of information if it does not display a currently valid OMB control number. PLEASE DO NOT RETURN YOUR FORM TO THE ABOVE ADDRESS. REPORT DATE (DD-MM-YYYY) SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSOR/MONITOR'S ACRONYM(S) SPONSOR/MONITOR'S REPORT NUMBER(S) DISTRIBUTION / AVAILABILITY STATEMENTDistribution Statement A: Approved for public release; Distribution is unlimited.13. SUPPLEMENTARY NOTES A paper submitted to the faculty of the NWC in partial satisfaction of the requirements of the JMO Department. The contents of this paper reflect my own personal views and are not necessarily endorsed by the NWC or the Department of the Navy. ABSTRACTIraq used Theater Ballistic Missiles in both Operation DESERT STORM and Operation IRAQI FREEDOM (OIF) in an effort to inflict damage to military and civilian targets. Coalition forces made a quantum leap from ODS in the capability to locate and destroy mobile launchers. There was little improvement, however, in command and control. The inability of our forces to exchange crucial Theater Ballistic Missile (TBM) data in our legacy data link systems is a significant shortfall. The difficulty in recreating complex and comprehensive scenarios to train joint forces needs to be addressed. Finally, a method of de-confliction, coordination and TBMD asset management still does not exist. This paper examines the lessons of the OIF TBM battle as a way to view current TBMD systems and discuss better ways to organize, train and equip joint forces for the future. There was little improvement, however, in command and control. The inability of our forces to exchange crucial Theater Ballistic Missile (TBM) data in our legacy data link systems is a significant shortfall. The difficulty in recreating complex and comprehensive scenarios to train joint forces needs to be addressed. Finally, a method of de-confliction, coordination and TBMD asset management still does not exist. This paper examines the lessons of the OIF TBM battle as a way to view current TBMD systems and discuss better ways to organize, train and equip joint forces for the future. SUBJECT TERMSiii