Abbassi, Wajih, Ben-Nasr, Hamdi, Boubaker, Sabri and Eshraghi, Arman ![]() ![]() |
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Abstract
Examining more than 16,000 firm-year observations in the United States, we provide novel evidence showing that higher financial statement readability leads to a decrease in information asymmetry and the need for external monitoring, thereby reducing the reliance on bank debt relative to public debt. Our channel tests show that information asymmetry, as measured by the bid–ask spread, partially mediates the relationship between readability and the bank debt ratio. Furthermore, cross-sectional tests demonstrate that information environment quality and financial constraints exacerbate the negative effect of readability on the bank debt ratio. Our results remain robust to a battery of additional tests. The study provides valuable insights for investors, firms, and regulators to improve transparency and market efficiency.
Item Type: | Article |
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Date Type: | Published Online |
Status: | In Press |
Schools: | Schools > Business (Including Economics) |
Publisher: | Wiley |
ISSN: | 0046-3892 |
Date of First Compliant Deposit: | 29 July 2025 |
Date of Acceptance: | 25 July 2025 |
Last Modified: | 19 Aug 2025 11:00 |
URI: | https://orca.cardiff.ac.uk/id/eprint/180089 |
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