Bridge over ocean
1 May 2005 Financial Analysts Journal Volume 61, Issue 3

Disclosure and the Loan Spread on Private Debt

  1. Sumon C. Mazumdar
  2. Partha Sengupta

Companies that consistently make detailed, timely, and informative disclosures face lower costs of public equity and debt capital. The study reported here investigated whether such companies also face lower interest costs on private debt contracts. Examination of a sample of 173 new private debt issues during the 1989–93 period suggests that, after company- and loan-specific factors and market conditions have been controlled for, loan spreads are negatively associated with a measure of companies' overall disclosure quality. That is, companies with consistently high ratings for voluntary disclosures pay lower interest on their private debt (bank loan) contracts.

Read the Complete Article in Financial Analysts Journal Financial Analysts Journal CFA Institute Member Content

We’re using cookies, but you can turn them off in Privacy Settings.  Otherwise, you are agreeing to our use of cookies.  Accepting cookies does not mean that we are collecting personal data. Learn more in our Privacy Policy.