Annual Report Readability, Tone Ambiguity, and the Cost of Borrowing

作者：Mine Ertugrul, Jin Lei, Jiaping Qiu, Chi Wan · 发表于：Journal of Financial and Quantitative Analysis · 年份：2017 · DOI：10.1017/s0022109017000187 · 被引用次数：585 · 研究领域：Auditing, Earnings Management, Governance、Corporate Finance and Governance、Corporate Taxation and Avoidance

This paper investigates the impact of a firm’s annual report readability and ambiguous tone on its borrowing costs. We find that firms with larger 10-K file sizes and a higher proportion of uncertain and weak modal words in 10-Ks have stricter loan contract terms and greater future stock price crash risk. Our results suggest that the readability and tone ambiguity of a firm’s financial disclosures are related to managerial information hoarding. Shareholders of firms with less readable and more ambiguous annual reports not only suffer from less transparent information disclosure but also bear the increased cost of external financing.