|
|
Forward-looking Statement and Debt Contracts: Empirical Evidence Based on Text Mining of Annual Report |
TIAN Gaoliang, XUE Yuting, LI Xin |
School of Management, Xi'an Jiaotong University |
|
|
Abstract: The study investigates the economic consequences of forward-looking information from creditors' perspective. Based on the data of 2007—2020 Chinese non-financial listed enterprises we study whether the forward-looking information in management discussion and analysis (MD&A) affects corporate debt contracts. The results show that higher levels of forward-looking information disclosure are associated with longer debt maturity, lower cost of debt capital, and larger debt scale, which means that creditors are willing to provide more profitable debt contracts to firms with higher levels of forwardlooking information disclosure. The result holds in a series of robustness tests. Further analysis reveals that the above correlations are more significant in the companies with higher readability of annual report text, low text similarity and more disclosure of strategic information. The channel analysis reveals that forward-looking disclosure improves debt covenants by providing incremental information to the market. The findings have implications for recognizing the value and function of forward-looking information in the capital market and provide a basis for preventing and mitigating capital market debt risks.
|
Received: 21 December 2022
Published: 15 April 2023
|
|
|
|
|
|
|
|