Open AccessFinancial Statement Comparability and New Debt Issues
Author(s) -
Aaron D. Crabtree,
Bo Ouyang,
Huishan Wan
Publication year - 2019
Publication title -
accounting and finance research
Language(s) - English
Resource type - Journals
eISSN - 1927-5994
pISSN - 1927-5986
DOI - 10.5430/afr.v8n2p143
Subject(s) - comparability , bond , financial statement , debt , yield (engineering) , sample (material) , business , investment (military) , financial statement analysis , finance , accounting , economics , actuarial science , financial ratio , metallurgy , chemistry , materials science , mathematics , audit , chromatography , combinatorics , politics , political science , law
Using a large sample of firms issuing new debts, this paper investigates how a firm’s financial statements comparability affects its cost of new debt issues. We predict and find that higher comparability is associated with (1) higher bond ratings and (2) lower bond yield spreads when companies issue new debts. Our results are consistent with the view that bond rating analysts and bond investor favor greater comparability when they evaluate new bonds and make investment decisions.