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Longitudinal accounting comparability and bond credit spreads: Evidence from China

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  • Shijiao Cao
  • Jianqiong Wang

Abstract

This paper proposes a procedure to measure firms’ longitudinal accounting comparability and investigates whether it affects bond risk premiums. The results provide robust evidence that bonds of firms with more longitudinally comparable accounting information have lower credit spreads. This effect is stronger when the firms’ financial performance is poor and for bonds with speculative credit ratings. Results also reveal that firms with less longitudinally comparable accounting information are more informationally asymmetric and do have a higher expected default probability. Finally, the effects of the longitudinal and the cross‐sectional comparability in reducing bond credit spreads are incremental to each other.

Suggested Citation

  • Shijiao Cao & Jianqiong Wang, 2023. "Longitudinal accounting comparability and bond credit spreads: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(2), pages 1953-1981, June.
    • Handle: RePEc:bla:acctfi:v:63:y:2023:i:2:p:1953-1981
    DOI: 10.1111/acfi.12939
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