News sentiment and the cost of debt11Our paper was accepted by the 2024 3rd Annual International Finance Conference (AIFC). The conference submission ID is “146”

Yedong Wang, Junchao Xiao, Lei Wang and Daoping Wang

Pacific-Basin Finance Journal, 2025, vol. 91, issue C

Abstract: Based on 4.4 million news articles from approximately 6000 newspapers, this paper investigates the relationship between news sentiment and the cost of debt. We find that news sentiment is negatively associated with firms' offering yield spreads. The analysis reveals that news sentiment influences the cost of debt at both firm level and market level. Further research finds that since Chengtou firms, state-owned firms and firms in developed provinces have strong government support, the impact of news sentiment will be moderated. Additionally, the impact of news sentiment is attenuated for firms with higher credit rating, lower debt ratio, or higher cash ratio. The findings are robust to controls for standard yield determinants, alternative measures of dependent and independent variables, and potential endogeneity concerns.

Keywords: News sentiment; Offering yield spreads; Cost of debt; Text analysis (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:91:y:2025:i:c:s0927538x25000587

DOI: 10.1016/j.pacfin.2025.102721

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