Abstract
Prior research has found that greater information transparency is positively related to a lower cost of debt. This paper studies the complementarity effect of the annual report comment letters (ARCLs) and transparency on corporate debt covenants. We find that firms receiving ARCLs charge a higher cost of debt, and the higher the frequency of ARCLs receipt, the longer the ARCLs, the requirement for qualified verification opinions, and the inclusion of debt-related keywords, the higher the cost of debt. Furthermore, information transparency can mitigate the positive regulatory effects. These findings can provide regulators, banks, and managers with a deeper understanding of the role of information disclosure and government regulation in debt covenants.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
