Peering Through the Accounting Noise: The Role of Comparability in Corporate Debt Choices

Abstract

This study examines the impact of financial statement comparability on firms' choice between public debt and bank debt. Building on the comparability measures developed by De Franco et al. (2011), we find that greater comparability is positively associated with the use of public debt and negatively associated with the use of bank debt. This relationship is more pronounced for firms with higher information asymmetry, more severe agency problems, and weaker corporate governance. Overall, our findings highlight the importance of comparability in enhancing the participation of public debt holders and contribute to recent work on the determinants of corporate debt choices.

Keywords: Financial statement comparability, Information quality, Agency costs, Public debt, Bank debt