EconPapers    
Economics at your fingertips  
 

Optimistic Disclosure Tone and Conservative Debt Policy

Ali Ataullah, Andrew Vivian and Bin Xu

Abacus, 2018, vol. 54, issue 4, 445-484

Abstract: We examine the relationship between managerial optimism and debt conservatism (i.e., the low‐leverage puzzle). Our analysis demonstrates that optimistic tone, our time‐varying optimism measure, significantly decreases leverage. This evidence supports the proposition that optimistic managers who consider external financing as unduly costly use debt conservatively. This reduced reliance on external financing can be explained by further evidence that optimistic tone significantly increases cash holdings and decreases dividend payment. The negative tone–leverage relation is stronger in the presence of high insider purchase of own stocks, which confirms that optimistic tone reflects managerial optimism. This study suggests that managerial optimism can help explain the low‐leverage puzzle.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/abac.12140

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:abacus:v:54:y:2018:i:4:p:445-484

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0001-3072

Access Statistics for this article

Abacus is currently edited by G.W. Dean and S. Jones

More articles in Abacus from Accounting Foundation, University of Sydney
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2019-05-31
Handle: RePEc:bla:abacus:v:54:y:2018:i:4:p:445-484