The impact of readability of risk disclosures in bond prospectuses on credit risk premium

Yanzhen Yao, Lu Wei, Haozhe Jing, Meiqi Chen and Zhan Li

Research in International Business and Finance, 2024, vol. 70, issue PA

Abstract: This paper for the first time analyzes the impact of the readability of risk disclosures in bond prospectuses on the credit risk premium. In the empirical analysis, the textual data including 5194 corporate bond prospectuses and structured data related to the corporate financial factors and the bond characteristics from 2006 to 2021 are used to perform the fixed effect regression analysis. The empirical results show that increasing the readability of the risk factor chapter in bond prospectuses will increase the credit risk premium by raising the investors’ risk perception. Additional tests demonstrate that ceteris paribus, the positive impact of the readability of risk disclosure in the bond prospectus on the credit risk premium will be weakened by implicit government guarantees carried by a state-owned issuer and the listing status of the bond issuer but be strengthened by better corporate business performance, more financing constraints, and higher financial distress risk.

Keywords: Readability of risk disclosures; Corporate bond prospectuses; Credit risk premium; Risk perception (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S027553192400103X
Full text for ScienceDirect subscribers only

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:eee:riibaf:v:70:y:2024:i:pa:s027553192400103x

DOI: 10.1016/j.ribaf.2024.102310

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().