Three Essays on Bond Returns and the Cost of Debt
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University of North Carolina at Charlotte
The three essays in this dissertation are focused on the same general research topic: returns to bondholders and the cost of debt. Each of the three essays should be treated as a stand-alone paper. The first essay is on the bond returns to debtholders. In this paper, I investigate whether conglomerate and standalone firms provides different returns to their bondholders based on a sample of investment grade bonds from 1994-2015. I find that bonds issued by standalone firms have a significantly lower return than bonds issued by conglomerates. The second and the third essay are interdisciplinary research of finance and accounting, with the second one on the effect of corporate earnings restatement on the cost of debt, while the third one on the effect of managerial voluntary disclosure on the cost of debt. The second paper is a first study of the effect of operating cash flow restatements on a firm’s cost of debt capital. My results indicate that firms with understated operating cash flows experience a reduced cost of debt capital after the announcements, supporting the notion that the restatement signals a firm’s favorable performance. On the other hand, the change in cost of debt for firms with overstated operating cash flow is generally insignificant. In the third paper, I investigate if and how managerial voluntary disclosure affects a firm’s cost of debt. My results indicate that managerial earnings forecast reduces information asymmetry, thus reduces the cost of debt. Moreover, the effect is asymmetric as investors respond to the additional information incorporated in the voluntary forecasts: positive surprises released in managerial earnings forecast reduce a firm’s cost of debt while negative surprises increase a firm’s cost of debt.
BOND RETURNCOST OF DEBTDIVERSIFICATIONRESTATEMENTVOLUNTARY DISCLOSURE
King, Tao-Hsien Dolly
Clark, StevenChiang, I-Hsuan EthanHong, Keejae
Thesis (Ph.D.)--University of North Carolina at Charlotte, 2016.
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