Creditor At The Gate: How Access To Debt Changes A Firm’s Disclosure Readability?

36 Pages Posted: 5 Aug 2022 Last revised: 7 Dec 2023

See all articles by Wenyao Hu

Wenyao Hu

Saint Mary's University; Rensselaer Polytechnic Institute (RPI) - Department of Finance and Accounting

Alice (Yanguang) Liu

University of Arizona, Eller College of Management, Department of Finance; New Jersey Institute of Technology, Martin Tuchman School of Management

Date Written: July 12, 2022

Abstract

This paper studies how the ease of repossessing collateral in bankruptcy affects corporate disclosure policy. Using a plausibly exogenous variation of the ability to repossess assets generated by state anti-recharacterization laws, we find that the anti-recharacterization laws, which make collateral repossession easier for secured lending, improve corporate disclosure readability. Consistent with the argument that firm with capital needs reduce financial statement complexity to borrow more debt, we show that the effect of ARLs on disclosure readability is less pronounced on high-growth firms and more profitable firms.

Keywords: Anti-recharacterization Laws; Disclosure Readability; Bog index; Access to Debt

JEL Classification: G3

Suggested Citation

Hu, Wenyao and Hu, Wenyao and Liu, Yanguang, Creditor At The Gate: How Access To Debt Changes A Firm’s Disclosure Readability? (July 12, 2022). Available at SSRN: https://ssrn.com/abstract=4161176 or http://dx.doi.org/10.2139/ssrn.4161176

Wenyao Hu (Contact Author)

Rensselaer Polytechnic Institute (RPI) - Department of Finance and Accounting ( email )

Pittsburg Building 2000
110, 8th street
Troy, NY 12180
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Saint Mary's University ( email )

923 Robie Street
Halifax, Nova Scotia B3H 3C3
Canada

HOME PAGE: http://wenyaohu.com

Yanguang Liu

University of Arizona, Eller College of Management, Department of Finance ( email )

New Jersey Institute of Technology, Martin Tuchman School of Management ( email )

University Heights
Newark, NJ 07102
United States

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