The role of information asymmetry and financial reporting quality in debt trading: Evidence from the secondary loan market

Wittenberg-Moerman, Regina

doi:10.1016/j.jacceco.2008.08.001

Cited by 433 publications

(212 citation statements)

References 88 publications

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“…Specifically, ln(MATURITY) is the natural logarithm of loan maturity in months. Long maturity might reflect a borrower's good credit quality and less information asymmetry (Wittenberg-Moerman (2008)). Therefore, a long-term debt may be charged a low interest rate.…”

Section: A Readability and Loan Spreadsmentioning

confidence: 99%

Annual Report Readability, Tone Ambiguity, and the Cost of Borrowing

Ertugrul¹,

Jin²,

Qiu³

et al. 2017

J. Financ. Quant. Anal.

420

239

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This paper investigates the impact of a firm's annual report readability and ambiguous tone on its borrowing costs. We find that firms with larger 10-K file sizes and a higher proportion of uncertain and weak modal words in 10-Ks have stricter loan contract terms and greater future stock price crash risk. Our results suggest that the readability and tone ambiguity of a firm's financial disclosures are related to managerial information hoarding. Shareholders of firms with less readable and more ambiguous annual reports not only suffer from less transparent information disclosure but also bear the increased cost of external financing.

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Section: A Readability and Loan Spreadsmentioning

confidence: 99%

Annual Report Readability, Tone Ambiguity, and the Cost of Borrowing

Ertugrul¹,

Jin²,

Qiu³

et al. 2017

J. Financ. Quant. Anal.

420

239

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“…An extensive and long-standing literature holds that this asymmetry in accounting is due in large part to the use of financial statement information in debt contracting, and also to its use in firms contracting with managers. The literature includes Leftwich (1983), Watts and Zimmerman (1986), Ball et al (2000a), , Holthausen and Watts (2001), Ahmed et al (2002), Watts (2003a,b), Shivakumar (2005, 2006), Beatty et al (2008), Wittenberg-Moerman (2008), Zhang (2008), and Aier et al (2014).…”

Section: Conservatism Prudence and Conditional Conservatismmentioning

confidence: 99%

IFRS – 10 years later

Ball

2016

Accounting and Business Research

145

119

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A decade ago, the near-simultaneous adoption of International Financial Reporting Standards (IFRS) in over 100 countries could fairly have been described as a brave new world in financial reporting. Any systems innovation, and especially an innovation of such importance and magnitude, thrusts those involved (companies, users, and accountants) into the unknown. There was good reason to expect success, based largely on widespread enthusiasm for international standards and, behind that, recognition of the strong forces of globalization. Nevertheless, there were risks involved and there was limited a priori evidence to guide the decision-makers. A decade later, this is still the case. Globalization remains a potent economic and political force, and drives the demand for globalization in accounting. Nevertheless, most political and commercial activity remains local, so adoption of uniform rules does not by itself lead to uniform reporting behavior around the world. For many of the claimed benefits of IFRS adoption to be realized, uniform implementation would have to occur in a wide range of countries, which seems unlikely and requires more than simply creating regulatory enforcement mechanisms. Some evidence of actual outcomes from IFRS adoption has come to light, but, as will be argued below, by and large the evidence to date is not very useful. The IASB's (International Accounting Standards Board) valuation-centric Conceptual Framework leads it to pay little or no heed to the use of accounting information in contracting, despite the lip service recent amendments pay to even the narrower notion of stewardship. So IFRS adoption is an innovation of historical proportions whose worldwide effects remain somewhat uncertain. The essay concludes with comments on the status of China and the US.

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“…One possible disadvantage of using the aggregate earnings-returns relation is that as earnings properties change, returns might change correspondingly.F One important caveat is that this paper focuses on the informational role of earnings in equity markets and that we do not address other uses of accounting information, such as the stewardship role and contracting (Watts and Zimmerman, 1986;Dye and Verrecchia, 1995;Holthausen and Watts, 2001;Sivakumar and Waymire, 2003;Watts, 2003aWatts, , 2003bBall, 2008;Ball, Robin and Sadka, 2008;Wittenberg-Moerman, 2008). Our findings suggest that while prior studies document that standards had a firmby-firm effect, the economy-wide effects on the representative firm and on the representative investor are negligible.…”

mentioning

confidence: 99%