 Uncertain tone, asset volatility and credit default swap spreadsHitesh Doshi, Saurin Patel, Srikanth Ramani and Matthew Sooy Journal of Contemporary Accounting and Economics, 2023, vol. 19, issue 3 Abstract: We examine the relationship between uncertain linguistic tone and credit default swap (CDS) spreads. Using an event study approach, we first show that uncertain linguistic tone in 10-Q/K filings is positively associated with CDS spread changes incremental to positive and negative tone and incremental to the response implied by equity market reactions to the same information. We further demonstrate that the relationship of uncertain tone to CDS spreads manifests largely through its impact on asset volatility. We show that this effect is driven by firms with high leverage and is stronger among firms with shorter relative to longer maturities. Our findings contribute to growing research into credit market reactions to non-quantitative information by demonstrating a positive relationship between credit market responses and uncertainty disclosure language, and that this relationship is mediated by investors’ implied asset volatility estimates. Keywords: Textual Analysis; Default Risk; Uncertainty; Tone; Accounting Disclosure (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:19:y:2023:i:3:s1815566923000309 DOI: 10.1016/j.jcae.2023.100380 Access Statistics for this article Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi More articles in Journal of Contemporary Accounting and Economics from Elsevier |
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