Date of Degree

9-2022

Document Type

Dissertation

Degree Name

Ph.D.

Program

Business

Advisor

Monica Neamtiu

Committee Members

Edward X. Li

Hagit Levy

Karl Lang

Subject Categories

Accounting

Keywords

Disclosure, Capex Forecasts, Bondholders

Abstract

This paper addresses how firms cater to bondholders’ demand for additional information by examining capital expenditure (capex) forecasts prior to bond issuance. While bondholders’ demand for additional information incentivizes firms to be more transparent, the importance of macroeconomic factors and comparable bonds outstanding in bond pricing might, however, decrease the benefit of additional disclosure. Using the difference-in-differences approach, I document that firms provide more capex forecasts prior to bond issuance. This increase in capex forecasts is detected when bonds are issued for capital expenditure purposes or when investment-restricting covenants protect bondholders. Next, I find that firms provide more conservative capex amounts prior to bond issuance. Conservative forecasts improve the accuracy by reducing deviations between projected and actual capex when firms invest fewer amounts ex post than predicted. Such forecast behaviors are more pronounced for firms relying more on the bond market, thus expecting greater benefits from enhanced accuracy. Overall, my findings are consistent with the view that bondholders significantly affect firm disclosure.

Included in

Accounting Commons

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