The Choice of Debt Source by UK Firms

Marshall, Andrew; McCann, Laura; McColgan, Patrick

doi:10.1111/jbfa.12194

Cited by 21 publications

(36 citation statements)

References 69 publications

(211 reference statements)

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“…(2019) and Marshall et al. (2016), we estimate the following two models:

\begin{matrix} true \\ right % o f p u b l i c d e b t_{i, t} & = & left α_{o} + a_{1} D i s c l o s u r e_{i, t - 1} + α_{2} F i r m_{S p e c i f i c} C o n t r o l s_{i, t - 1} + α_{3} I s s u e_{S p e c i f i c} C o n t r o l s_{i, t} \\ left + α_{4} C o u n t r y_{S p e c i f i c} C o n t r o l s_{i, t} + ((), Y e a r, I n d u s t r y, C o u n t r y f i x e d e f f e c t) + ε_{i, t} \end{matrix}

\begin{matrix} true \\ right P ([], P u b l i c d e b t i s s u e_{j, i, t} = 1) & = & left α_{o} + a_{1} D i s c l o s u r e_{i, t - 1} + α_{2} F i r m_{S p e c i f i c} C o n t r o l s_{i, t - 1} \\ left + α_{3} I s s ... \end{matrix}

…”

Section: Methodsmentioning

confidence: 95%

“…We follow Marshall et al. (2016) and Kreß et al. (2019) and control for issue‐specific variables that might explain the choice of debt source ( log(Debt amount) and log(Maturity) ).…”

Section: Methodsmentioning

confidence: 99%

“…The level of compliance with pension‐related disclosures and all firm‐specific variables are measured in the year preceding the debt issuance date, while all issue‐ and country‐specific variables are measured at the debt issuance date (Florou & Kosi, 2015; Kreß et al., 2019; Marshall et al., 2016), to alleviate potential concern over reverse causality between the dependent and independent variables (Dhaliwal et al., 2011).…”

Section: Methodsmentioning

confidence: 99%

“…This leads the setting of initial contracts within the public debt market to largely reflect a firm's information environment (Bharath et al., 2008; Florou & Kosi, 2015). Considering these differences, prior studies have linked access to the public and private debt markets to the information asymmetries between firms and debt providers in the two markets (e.g., Altunbaş et al., 2010; Dhaliwal et al., 2011; Marshall, McCann, & McColgan, 2016).…”

Section: Related Literature and Hypotheses Developmentmentioning

confidence: 99%

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Compliance with pension‐related mandatory disclosures and debt financing

Almaghrabi

Opong

Tsalavoutas

2020

Business Fin & Account

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Using hand‐collected data on the level of pension‐related mandatory disclosures required by International Accounting Standard 19 Employee Benefits, we test whether compliance levels with these disclosures convey information that affects firms’ access to the public instead of the private debt market, as well as the cost of their new debt issues. We document a higher tendency to access the public debt market for firms with higher levels of pension‐related disclosure. Furthermore, we find that firms with higher levels of pension‐related disclosure enjoy a lower cost in terms of issuance of public debt, but not a lower cost for private debt issues. Thus, the benefits of disclosure in reducing information risk are only realisable when creditors rely heavily on financial statements in their decision making, due to the limited access to private information. Additional tests reveal that high compliance levels effectively mitigate the negative effect of pension deficits on the cost of public debt. These findings provide novel evidence in the extant literature on the role of mandatory (and, in particular, pension‐related) disclosures on firms’ debt financing. They also have important policy implications.

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“…(2019) and Marshall et al. (2016), we estimate the following two models:

\begin{matrix} true \\ right % o f p u b l i c d e b t_{i, t} & = & left α_{o} + a_{1} D i s c l o s u r e_{i, t - 1} + α_{2} F i r m_{S p e c i f i c} C o n t r o l s_{i, t - 1} + α_{3} I s s u e_{S p e c i f i c} C o n t r o l s_{i, t} \\ left + α_{4} C o u n t r y_{S p e c i f i c} C o n t r o l s_{i, t} + ((), Y e a r, I n d u s t r y, C o u n t r y f i x e d e f f e c t) + ε_{i, t} \end{matrix}

\begin{matrix} true \\ right P ([], P u b l i c d e b t i s s u e_{j, i, t} = 1) & = & left α_{o} + a_{1} D i s c l o s u r e_{i, t - 1} + α_{2} F i r m_{S p e c i f i c} C o n t r o l s_{i, t - 1} \\ left + α_{3} I s s ... \end{matrix}

…”

Section: Methodsmentioning

confidence: 95%

“…We follow Marshall et al. (2016) and Kreß et al. (2019) and control for issue‐specific variables that might explain the choice of debt source ( log(Debt amount) and log(Maturity) ).…”

Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Related Literature and Hypotheses Developmentmentioning

confidence: 99%

See 2 more Smart Citations

Compliance with pension‐related mandatory disclosures and debt financing

Almaghrabi

Opong

Tsalavoutas

2020

Business Fin & Account

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show abstract

“…The dependent variable is total newly issued equity and bonds as a percentage of total assets. Control variables are based on prior studies (Beck et al 2008;Denis and Mihov 2003;Marshall et al 2016). The results are presented in panel B of Table 6.…”

Section: Supplemental Tests: Other Consequences Of the Anti-corruptiomentioning

confidence: 99%

China's Anti‐Corruption Campaign and Financial Reporting Quality

Hope

Yue

Zhong

2020

Contemporary Accting Res

147

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We examine the impact of China's anti‐corruption campaign on firm‐level financial reporting quality (FRQ). As an important component of the anti‐corruption campaign, in October 2013, “Rule 18” was issued to prohibit party and government officials from serving as directors for publicly listed firms. The regulation led to a large number of official directors resigning from their roles as directors involuntarily. As such, Rule 18 has effectively weakened, if not fully discontinued, the political connections of the firms that previously hired officials as directors. Our empirical analyses employ a difference‐in‐differences research design with firm fixed effects and propensity‐score matching to examine the pre‐ and post‐period FRQ around the enactment of Rule 18. We find that, compared to propensity‐score‐matched control firms, FRQ of firms with resigned official directors increases after Rule 18. Further evidence suggests that the impact is stronger when firms are located in regions with more developed financial markets and in regions with higher judiciary efficiency. We also find that the effect is more pronounced when firms are non‐state‐owned, received preferential credits, and face refinancing pressure.

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The market reaction to debt announcements: UK evidence surrounding the global financial crisis

Marshall

McCann

McColgan

2019

The British Accounting Review

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We examine the stock market response to announcements of public, bank and privately placed debt issuance by large UK firms surrounding the global financial crisis of 2008. Prior to the crisis, we find that stock prices respond positively to announcements of bank debt issuance only. This is restricted to the sub-sample of syndicated bank loans and this is suggestive of the certification from multiple lenders conveying a signal of creditworthiness. We find that abnormal returns on the announcement of bank loans have declined since the financial crisis, both in absolute terms and in comparison to alternative borrowing sources. Overall, our results suggest that surrounding the global financial crisis of 2008, bank loans have become less informative as a signal of the creditworthiness of borrowing firms.

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The Choice of Debt Source by UK Firms

Cited by 21 publications

References 69 publications

Compliance with pension‐related mandatory disclosures and debt financing

Compliance with pension‐related mandatory disclosures and debt financing

China's Anti‐Corruption Campaign and Financial Reporting Quality

The market reaction to debt announcements: UK evidence surrounding the global financial crisis

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