Disclosure and the Loan Spread on Private Debt

Posted: 24 Jun 2005

See all articles by Sumon C. Mazumdar

Sumon C. Mazumdar

Law and Economics Consulting Group (LECG), LLC; University of California, Berkeley - Haas School of Business

Partha Sengupta

Government of the United States of America - Office of the Comptroller of the Currency (OCC)

Abstract

Companies that consistently make detailed, timely, and informative disclosures face lower costs of public equity and debt capital. The study reported here investigated whether such companies also face lower interest costs on private debt contracts. Examination of a sample of 173 new private debt issues during the 1989-1993 period suggests that, after company- and loan-specific factors and market conditions have been controlled for, loan spreads are negatively associated with a measure of companies' overall disclosure quality. That is, companies with consistently high ratings for voluntary disclosures pay lower interest on their private debt (bank loan) contracts.

Keywords: Financial statement analysis, accounting and financial reporting issues, debt investment, credit analysis, corporate finance, capital investment decisions, corporate governance

Suggested Citation

Mazumdar, Sumon C. and Sengupta, Partha, Disclosure and the Loan Spread on Private Debt. Available at SSRN: https://ssrn.com/abstract=746584

Sumon C. Mazumdar (Contact Author)

Law and Economics Consulting Group (LECG), LLC ( email )

2000 Powell Street, Suite 600
Emeryville, CA 94608
United States
510-450-5493 (Phone)

University of California, Berkeley - Haas School of Business

Finance Department
Berkeley, CA 94720
United States

Partha Sengupta

Government of the United States of America - Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street, SW
Mail Stop 6E-3
Washington, DC 20219-0001
United States
202-679-5525 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,496
PlumX Metrics