Corporate diversification and the cost of debt
Franco, Francesca
Corporate diversification and the cost of debt : the role of segment disclosures / Francesca Franco, Oktay Urcan & Florin P. Vasvari . -- Páginas 1139 a la 1165
Reseña : Previous theoretical arguments suggest that industrial diversification provides a co-insurance effect that decreases the firm's default risk. In this paper, we endogenously estimate a firm's segment disclosure quality and investigate whether the quality of segment disclosures significantly affects bond investors' assessment of the co-insurance effect of diversification. We document that bonds issued by industrially diversified firms with high-quality segment disclosures have significantly lower yields than bonds issued by diversified firms with low-quality segment disclosures. We also find that the negative relation between industrial diversification and bond yields becomes stronger when firms improve segment disclosures as a result of FAS 131. Finally, we show that high-quality segment disclosures are associated with lower syndicated loan spreads for a subsample of loans issued by large bank syndicates, which are more likely to rely on publicly reported segment information..
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Finanzas corporativas--Legislación--Estados Unidos--Publicaciones seriadas
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Urcan, Oktay ; Vasvari, Florin P. ;
Corporate diversification and the cost of debt : the role of segment disclosures / Francesca Franco, Oktay Urcan & Florin P. Vasvari . -- Páginas 1139 a la 1165
Reseña : Previous theoretical arguments suggest that industrial diversification provides a co-insurance effect that decreases the firm's default risk. In this paper, we endogenously estimate a firm's segment disclosure quality and investigate whether the quality of segment disclosures significantly affects bond investors' assessment of the co-insurance effect of diversification. We document that bonds issued by industrially diversified firms with high-quality segment disclosures have significantly lower yields than bonds issued by diversified firms with low-quality segment disclosures. We also find that the negative relation between industrial diversification and bond yields becomes stronger when firms improve segment disclosures as a result of FAS 131. Finally, we show that high-quality segment disclosures are associated with lower syndicated loan spreads for a subsample of loans issued by large bank syndicates, which are more likely to rely on publicly reported segment information..
Contabilidad--Publicaciones seriadas
Finanzas corporativas--Legislación--Estados Unidos--Publicaciones seriadas
Análisis de inversiones--Publicaciones seriadas
Negocios--Publicaciones seriadas
Mercados financieros--Publicaciones seriadas
Urcan, Oktay ; Vasvari, Florin P. ;