tailieunhanh - Financial statement comparability and new debt issues

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. | http afr. Accounting and Finance Research Vol. 8 No. 2 2019 Financial Statement Comparability and New Debt Issues Aaron Crabtree1 Bo Ouyang2 Huishan Wan3 1 School of Accountancy University of Nebraska-Lincoln Lincoln NE 68588-0488 USA 2 School of Graduate Professional Studies Pennsylvania State University at Great Valley Malvern PA 19355 USA 3 Department of Accounting University of Northern Iowa Cedar Falls IA 50613 USA Correspondence Huishan Wan Department of Accounting University of Northern Iowa Cedar Falls IA 50613 USA. E-mail Received March 15 2019 Accepted April 3 2019 Online Published April 4 2019 doi URL https Abstract 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. Keywords comparability new debt issues bond ratings bond yield 1. Introduction In this study we examine the impact of accounting comparability on the cost of new debt issues. The Financial Accounting Standards Board s FASB Statement of Financial Accounting Concepts SFAC No. 8 Qualitative Characteristics of Useful Financial Information defines comparability as the qualitative characteristic that enables users to identify and understand similarities in and differences among financial statement items . Accounting comparability is arguably one of the most important accounting qualities Kothari et al. 2010 and we complement emergent studies on the impact of accounting quality by investigating its effect on one significant third -party cost namely the cost of new debt issues. We predict the .