Credit default swap spreads and annual report readability

Publication Type

Journal Article

Publication Date

2-2018

Abstract

This paper investigates whether annual report readability matters to CDS market participants and how it affects their evaluation on a firm's credit risk, as measured by CDS spreads. We find that the less readable the annual reports, the higher the CDS spreads. Furthermore, the impact of readability on CDS spreads is more concentrated on firms with high information asymmetry and with investment grade ratings. Our results suggest that investors take into account the readability in their view of the firms' credit risk. Creditors appear to suffer higher cost on CDS protection of the debts if the underlying firms have less readable annual reports.

Keywords

Credit default swap (CDS), Credit risk, Annual report readability, 10-K

Discipline

Databases and Information Systems | Finance and Financial Management

Research Areas

Information Systems and Management

Publication

Review of Quantitative Finance and Accounting

Volume

50

Issue

2

First Page

591

Last Page

621

ISSN

0924-865X

Identifier

10.1007/s11156-017-0639-8

Publisher

Springer Verlag (Germany)

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1007/s11156-017-0639-8

This document is currently not available here.

Share

COinS