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| Author: | Wittenberg-Moerman, R. |
| Title: | The role of information asymmetry and financial reporting quality in debt trading: evidence from the secondary loan market |
| Journal: | Journal of Accounting & Economics
2008 : DEC, VOL. 46:2-3, p. 240-260 |
| Index terms: | loans trading asymmetric information loss accounting principles debt |
| Language: | eng |
| Abstract: | This paper explores which firm and loan characteristics decrease or exacerbate information asymmetry in the trading of private debt. It is found that loans of public firms, loans with an available credit rating, loans of profit firms and loans syndicated by more reputable arrangers are traded at lower bid-ask spreads, while revolvers, distressed loans and loans issued by institutional investors are associated with higher information costs. Timely loss recognition is also found to reduce the bid-ask spread. The findings suggest that conservative reporting decreases information asymmetry regarding a borrower and increases the efficiency of the secondary trading of debt securities. |
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