Financial Statement Disaggregation and Bank Loan Pricing
51 Pages Posted: 7 Feb 2018 Last revised: 10 Mar 2019
Date Written: January 30, 2018
We analyze whether the disaggregation quality (DQ) of a borrower’s financial statement is associated with its bank loan pricing. We find that firms with low DQ have high bank loan spreads and total cost of borrowing. These results are more pronounced for risky and poorly governed firms. Moreover, a low DQ is associated with a high likelihood of requiring collateral, low credit rating, and high bond issuing spreads. Overall, our results suggest that DQ conveys valuable credit quality information to bank loan lenders.
Keywords: disaggregation quality, bank loan spread, total cost of borrowing, disclosure quality, default risk
JEL Classification: G21, G24, G32, M41
Suggested Citation: Suggested Citation