An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Frank Heflin
Florida State University

Ken Shaw
University of Missouri - Columbia

John Wild
University of Wisconsin - Madison

Abstract: We study the relation between the cost of credit capital and financial analysts’ ratings of firms’ annual report, quarterly and other information, and management relations disclosure policies. We find that credit ratings are better, and yield spreads on new bond issues lower, for firms with higher rated annual report disclosures. We also show that significant increases in analyst ratings of annual report quality are accompanied by improvements in credit ratings. We find no relation between credit capital cost proxies and analysts’ ratings of either quarterly report disclosures or management-analyst relations. Overall, our results suggest that a commitment to better annual report disclosure is related to lower costs of debt capital.

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