The impact of news articles and corporate disclosure on credit risk valuation

Tsai, Feng-Tse; Lu, Hsin-Min; Hung, Mao‐Wei

doi:10.1016/j.jbankfin.2016.03.018

Cited by 41 publications

(19 citation statements)

References 42 publications

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“…Another reason could be that such disclosures enhance the board of directors’ monitoring of managerial actions, lower instances of managerial opportunism, allow the firm to write more efficient contracts as a result of increased transparency about current and future business conditions, and therefore enhance firm performance (see Armstrong, Guay, and Weber 2010). Moreover, the increased amount of oversight for investors and analysts may function as a quality signal and affect credit risk for debt issuers (Tsai, Lu, and Hung 2016). Clearly, these are preliminary conjectures, and more systematic research is required.…”

Section: Discussionmentioning

confidence: 99%

Do Disclosures of Customer Metrics Lower Investors’ and Analysts’ Uncertainty but Hurt Firm Performance?

Bayer

Tuli

Skiera

2017

Journal of Marketing Research

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Investors, analysts, and regulators frequently advocate greater disclosure of nonfinancial information, such as customer metrics. Managers, however, argue that such metrics are costly to report, reveal sensitive information to competitors, and therefore will lower future cash flows. To examine these counterarguments, this study presents the first empirical examination of the prevalence and consequences of backward- and forward-looking disclosures of customer metrics by manually coding 511 annual reports of firms in two industries, telecommunications (365 reports) and airlines (146 reports). The results reveal significant heterogeneity in the disclosure of customer metrics across firms and between industries. On average, in both industries, firms make more backward-looking than forward-looking disclosures. Notably, forward-looking disclosures of customer metrics are negatively associated with investors’ uncertainty in both industries and with analysts’ uncertainty in the telecommunications industry. Importantly, the results do not support the managerial thesis that such disclosures have a negative impact on future cash flows.

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Section: Discussionmentioning

confidence: 99%

Do Disclosures of Customer Metrics Lower Investors’ and Analysts’ Uncertainty but Hurt Firm Performance?

Bayer

Tuli

Skiera

2017

Journal of Marketing Research

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“…Kim and Yasuda (2018) find that the introduction of mandatory business risk disclosure negatively impacts the total risk of a firm, implying that an improvement in mandatory business risk disclosure reduces a firm's cost of capital. Tsai et al (2016) report that more news coverage and negative news sentiment worsen credit risk and that an increase in the volume of risk factor disclosure in corporate filings is associated with higher credit risk for debt issuers.…”

Section: Review Of Related Studiesmentioning

confidence: 99%

“…The value addition of this study to the existing literature is three-fold. First, previous studies on disclosure (e.g., Chauhan & Kumar, 2018;Chen, Li, Hu, & Hu, 2019;Cheng et al, 2020;Goldstein & Yang, 2019;Haque & Jones, 2020;Rezaee & Tuo, 2017;Srairi, 2019;Ting, 2020;Tsai, Tu, & Hung, 2016) have not specifically tackled the effect of corporate disclosure on credit market development. We demonstrate from our data that corporate disclosure accelerates credit market development.…”

Section: Introductionmentioning

confidence: 99%

Corporate disclosure and credit market development

Adusei

Adeleye

2021

Journal of Applied Economics

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The nexus between corporate disclosure and credit market development as well as whether the nexus is sensitive to the income classification of countries is not well delineated in the empirical literature. The objective of this paper is to interrogate these issues. In addressing these important issues, we rely on a panel of 122 countries and deploy a battery of econometric techniques. Generally, we find that corporate disclosure promotes credit market development. The results from the analysis of subsamples suggest that the effect of corporate disclosure on credit market development is sensitive to creditor rights protection and the income status of a country. In particular, there is evidence that the interaction between corporate disclosure and creditor rights protection significantly benefits the credit markets only in upper-middle-income countries.

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“…First, textual information from news and managerial comments contains incremental informational content for evaluating firms' credit risk (Smales, 2016;Tsai et al, 2016). Second, a higher volume of risk-factor disclosures indicates higher credit risk (Tsai et al, 2016;Deaconu et al, 2016). Finally, user-generated social media content can enhance the information base for analysing corporate credit risk (Mengelkamp et al, 2015).…”

Section: Related Literaturementioning

confidence: 99%

Mining Risk-Related Sentiment in Corporate Annual Reports and Its Effect on Financial Performance

Myšková

Hájek

2020

Technological and Economic Development of Economy

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Models that predict corporate financial risk are important early-warning systems for corporate stakeholders. Most models to date have been developed using financial indicators. However, in financial decision-making, increasing attention is being paid to the role of textual information, which may provide additional insight into managerial opinions and intentions and which has recently been used to more effectively predict corporate financial performance. Previous approaches in this regard have predominantly focused on sentiment analysis of managerial communication. However, the role of context-related sentiment remains poorly understood in the financial risk domain. Here, we investigate how risk-related sentiment in verbal managerial communication might predict corporate financial performance, including indebtedness, profitability, market value and bankruptcy risk. To ensure deductive content validity, we propose specific word lists for each type of corporate financial risk and assign each word with positive / negative labels. Our findings provide evidence for a major role of risk-related sentiment as an indicator of corporate performance in terms of financial risks. Notably, using novel risk-related word lists in regression models, we show that a proactive and opportunity-seeking risk management has a significantly positive impact on financial performance, implying that stakeholders should carefully consider the risk-related managerial communication in corporate annual reports.

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The impact of news articles and corporate disclosure on credit risk valuation

Cited by 41 publications

References 42 publications

Do Disclosures of Customer Metrics Lower Investors’ and Analysts’ Uncertainty but Hurt Firm Performance?

Do Disclosures of Customer Metrics Lower Investors’ and Analysts’ Uncertainty but Hurt Firm Performance?

Corporate disclosure and credit market development

Mining Risk-Related Sentiment in Corporate Annual Reports and Its Effect on Financial Performance

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