Do significant risk warnings in annual reports increase corporate bond credit spreads? Evidence from China
Based on listed companies issuing bonds on the Shanghai and Shenzhen Stock Exchanges from 2007 to 2017, this study analyzes the relationship between significant risk warnings in Chinese companies’ annual reports and corporate bond credit spreads. The main findings are as follows. First, in the Chine...
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2019-06-01
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Series: | China Journal of Accounting Research |
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doaj-90edea680cd94cb6812347a14e2bd2c22020-11-25T01:48:40ZengElsevierChina Journal of Accounting Research1755-30912019-06-01122191208Do significant risk warnings in annual reports increase corporate bond credit spreads? Evidence from ChinaXi Gao0Xiongyuan Wang1Furong Tian2School of Accounting, Yunnan University of Finance and Economics, China; Corresponding author at: No. 237, Longquan Rd., Wuhua, 650221 Kunming, China.School of Accounting, Zhongnan University of Economics and Law, ChinaSchool of Accounting, Yunnan University of Finance and Economics, ChinaBased on listed companies issuing bonds on the Shanghai and Shenzhen Stock Exchanges from 2007 to 2017, this study analyzes the relationship between significant risk warnings in Chinese companies’ annual reports and corporate bond credit spreads. The main findings are as follows. First, in the Chinese market, “substantial warnings of significant risks” can significantly improve corporate bond credit spreads, reflecting the risk-warning effect; second, state-owned property rights weaken this effect, which only pertains to listed companies with poor risk management and low information quality; third, significant risk warnings increase investors’ heterogeneous beliefs, also affecting credit spreads; and fourth, through textual analysis, it is found that the corporate bond credit spread is greater when the disclosed risk factors are more pessimistic and less similar to those of the previous year. The findings of this paper help to enrich the literature on credit spreads and risk disclosure. Keywords: Risk disclosure, Risk warning, Credit spreadshttp://www.sciencedirect.com/science/article/pii/S1755309119300139 |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Xi Gao Xiongyuan Wang Furong Tian |
spellingShingle |
Xi Gao Xiongyuan Wang Furong Tian Do significant risk warnings in annual reports increase corporate bond credit spreads? Evidence from China China Journal of Accounting Research |
author_facet |
Xi Gao Xiongyuan Wang Furong Tian |
author_sort |
Xi Gao |
title |
Do significant risk warnings in annual reports increase corporate bond credit spreads? Evidence from China |
title_short |
Do significant risk warnings in annual reports increase corporate bond credit spreads? Evidence from China |
title_full |
Do significant risk warnings in annual reports increase corporate bond credit spreads? Evidence from China |
title_fullStr |
Do significant risk warnings in annual reports increase corporate bond credit spreads? Evidence from China |
title_full_unstemmed |
Do significant risk warnings in annual reports increase corporate bond credit spreads? Evidence from China |
title_sort |
do significant risk warnings in annual reports increase corporate bond credit spreads? evidence from china |
publisher |
Elsevier |
series |
China Journal of Accounting Research |
issn |
1755-3091 |
publishDate |
2019-06-01 |
description |
Based on listed companies issuing bonds on the Shanghai and Shenzhen Stock Exchanges from 2007 to 2017, this study analyzes the relationship between significant risk warnings in Chinese companies’ annual reports and corporate bond credit spreads. The main findings are as follows. First, in the Chinese market, “substantial warnings of significant risks” can significantly improve corporate bond credit spreads, reflecting the risk-warning effect; second, state-owned property rights weaken this effect, which only pertains to listed companies with poor risk management and low information quality; third, significant risk warnings increase investors’ heterogeneous beliefs, also affecting credit spreads; and fourth, through textual analysis, it is found that the corporate bond credit spread is greater when the disclosed risk factors are more pessimistic and less similar to those of the previous year. The findings of this paper help to enrich the literature on credit spreads and risk disclosure. Keywords: Risk disclosure, Risk warning, Credit spreads |
url |
http://www.sciencedirect.com/science/article/pii/S1755309119300139 |
work_keys_str_mv |
AT xigao dosignificantriskwarningsinannualreportsincreasecorporatebondcreditspreadsevidencefromchina AT xiongyuanwang dosignificantriskwarningsinannualreportsincreasecorporatebondcreditspreadsevidencefromchina AT furongtian dosignificantriskwarningsinannualreportsincreasecorporatebondcreditspreadsevidencefromchina |
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