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Pricing of off‐balance sheet debt: how do bond market participants use the footnote disclosures on operating leases and postretirement benefit plans?
Author(s) -
Sengupta Partha,
Wang Zheng
Publication year - 2011
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.2010.00368.x
Subject(s) - debt , balance sheet , bond , balance (ability) , off balance sheet , business , bond credit rating , monetary economics , economics , financial system , finance , credit risk , medicine , physical medicine and rehabilitation , credit reference
In this study, we examine whether the public debt market prices information on off‐balance sheet debt arising from operating leases and postretirement plans. We find that bond‐rating agencies price off‐balance sheet debt arising from operating leases and the coefficient on off‐balance sheet debt measure of operating leases is similar to that of capital leases on the balance sheet. Regarding postretirement benefit plans, we find that bond‐rating agencies do price postretirement benefit obligations that are reported in balance sheet but do not price such obligations disclosed in footnotes. We find similar results when we examine corporate bond yields on new debt issues.