Earnings Announcements, Information Asymmetry and Timing of Debt Offerings

Posted: 16 Mar 2013 Last revised: 26 Jun 2017

See all articles by Jon N. Kerr

Jon N. Kerr

Ohio State University (OSU) - Department of Accounting & Management Information Systems

N. Bugra Ozel

University of Texas at Dallas

Date Written: March 15, 2015

Abstract

We empirically examine the joint predictions of the pecking order theory and the theory of time-varying asymmetric information regarding the timing of security offerings around information disclosures. We analyze loan originations and bond offerings around earnings announcements and compare them against equity offerings. In support of the theories’ predictions, we find a positive association between the information sensitivity of securities and the likelihood of their issuance after earnings announcements. In particular, we find that clustering after earnings announcements is weakest in loan originations, stronger in bond offerings, and strongest in equity offerings. Also consistent with the theories, we find that the size of news in earnings announcements matters in the timing decision. We find weak evidence regarding the theories’ implication that the direction of news in the announcement plays a role in the timing decision. We test and find that this latter result is attributable partly to potential costs associated with the omission of material negative information, such as litigation risk.

Keywords: Information asymmetry, Earnings announcements, Bond offerings, Loan originations, Seasoned equity offerings

JEL Classification: D82; G14; G39; M41

Suggested Citation

Kerr, Jon N. and Ozel, N. Bugra, Earnings Announcements, Information Asymmetry and Timing of Debt Offerings (March 15, 2015). The Accounting Review, 2015, Available at SSRN: https://ssrn.com/abstract=2234204 or http://dx.doi.org/10.2139/ssrn.2234204

Jon N. Kerr

Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States
614-292-2698 (Phone)

N. Bugra Ozel (Contact Author)

University of Texas at Dallas ( email )

800 W Campbell Rd SM41
Richardson, TX 75201
United States

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