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Information Signals And Financial Distress In The Corporate Debt Market

Title data

Loy, Thomas:
Information Signals And Financial Distress In The Corporate Debt Market.
2015
Event: 38th Annual Congress of the European Accounting Association , 28.-30.04.2015 , Glasgow, UK.
(Conference item: Conference , Paper )

Abstract in another language

This study extends recent research in the corporate debt market by investigating the use and importance of (accounting) information signals and its association to the level of financial distress inherent in the debt market. Controlling for the presence of systematic risk and private information of credit rating agencies, we provide evidence that accounting accruals and cash flows are not associated with corporate bond returns during periods characterized by a low level of financial distress. However, using a point estimate of the conditional mean of annual bond returns, we find a positive and significant association of accounting accruals and equity book value with annual bond returns during financial distress periods, such as the recent global financial crisis (GFC). Additionally, using a semi-parametric technique to include conditional quantiles of bond returns, we show that the rate of change in the regression coefficients is dependent on the distribution of bond returns. Our results suggest that debt market investors base their investment decisions on credible accounting-based measures (i.e., accruals and leverage information extracted from 10-K financial statements) during financial distress periods, but on average neglect accounting information if the financial distress in the market is negligible.

Further data

Item Type: Conference item (Paper)
Refereed: Yes
Keywords: Bond market; Financial distress; Information signals
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Junior Professorship Auditing > Junior Professorship Auditing - Juniorprof. Dr. Thomas Loy
Profile Fields > Emerging Fields > Governance and Responsibility
Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Business Administration
Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Junior Professorship Auditing
Profile Fields
Profile Fields > Emerging Fields
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 15 Jun 2015 08:29
Last Modified: 15 Jun 2015 08:29
URI: https://eref.uni-bayreuth.de/id/eprint/14960