Creditor At The Gate: How Access To Debt Changes A Firm’s Disclosure Readability?
36 Pages Posted: 5 Aug 2022
Date Written: July 12, 2022
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 to 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: Suggested Citation