Financial Statement Comparability and New Debt Issues

Aaron Crabtree, Bo Ouyang, Huishan Wan


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. 

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