عدم تقارن اطلاعات و تأثیر تخصیص بودجه در بازار اوراق قرضه
Abstract
1- Introduction
2- Empirical methodology
3- Data and variables measurement
4- Empirical results
5- Conclusion
References
Abstract
We examine the effect of an exogenous increase in information asymmetry (as proxied by late filings of firms' Form 10-K) on bond prices. We find that bondholders react negatively to a late filing announcement but this negative reaction is conditional on whether late filing firms appropriate wealth from bondholders through shareholder distribution. Moreover, we find that the impact of financial distress and covenants on bond values is mainly driven by the wealth appropriation from bondholders. The results are robust to difference-in-difference analysis using treatment (i.e., late filing) and control (i.e., non-late-filing) samples based on propensity score matching. The results provide evidence that shareholder distribution as a specific form of wealth appropriation from bondholders to shareholders has a significant effect on bond values when financial information is not timely provided to capital markets.
Introduction
It is well known that timely disclosure of periodic financial statement information helps capital market participants make informed investment decisions, which in turn decreases the information asymmetry between managers and investors (e.g., Glosten & Milgrom, 1985; Hakansson, 1977; Healy & Palepu, 2001). One such vital corporate disclosure is the firm's annual financial filings with the SEC, i.e., the Form 10-K.1 Recent research on the equity side examining the consequences of an increase in information asymmetry caused by late disclosures of 10-Ks documents negative and significant equity market reaction (e.g., Bartov, Defond, & Konchitchki, 2015).2 In this paper, we investigate the effect of an exogenous increase to information asymmetry, as proxied by late filing of annual financial statements with the SEC, on bond values.3 We focus on the U.S. bond market for several reasons. First, the U.S. bond market is one of the largest capital markets in the world with over $9.8 trillion outstanding corporate bonds issued by U.S. firms as of end of 2013.4 Second, prior research suggests that the value of debt is less sensitive to asymmetric information than the value of equity because debtholders own a put option on the firm's assets (e.g., Kerr & Ozel, 2015; Myers & Majluf, 1984). Hence, it is unclear whether the asymmetric information caused by late disclosures will have significant consequences in the bond market. Third, the U.S. bond market is dominated by institutional investors, and it is unclear whether bond investors will react to announcements of non-timely SEC filings if these institutional investors can have access to various information sources other than public financial filings (e.g., Defond & Zhang, 2014; Ronen & Zhou, 2013) that can help them anticipate the late filing before it actually occurs. Fourth, announcements of non-timely filings of financial statements may not necessarily trigger bond values downward because late filing firms may agree with bond investors to delay the release of their financial statements by, for example, giving bondholders more leverage over the firm's assets.5 Finally, prior research finds that late filing firms are on average smaller, more levered, with lower market to book and profitability (e.g., Bartov et al., 2015). These firms are usually in serious default risk and bondholders may have already priced in such a high level of information asymmetry. Therefore, the findings on the consequences of an increase in information asymmetry caused by late filings previously documented in the equity market may not necessarily hold in the bond market.