Financial Reporting Quality and Dual-Holding of Debt and Equity

Leila Peyravan

35 citations0/0 files storedThe Accounting Review

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Auditing, Earnings Management, Governance Financial Markets and Investment Strategies Corporate Finance and Governance

Abstract

ABSTRACT I investigate whether the financial reporting quality (FRQ) of a firm influences the propensity of institutional investors to simultaneously hold the firm's debt and equity (dual-holding). I predict that the underlying reason for institutional dual-holding is access to the better information that is available to lenders in firms with low FRQ. Accordingly, I find that dual-holders are more likely to participate in firms with low FRQ. Additionally, I predict and find that dual-holders trade on the additional information received from borrowers. I find that dual-holders achieve excess returns of 8 percent on their trades in the borrower's equity, and that the direction of their trades predicts the direction of borrowers' news on the earnings announcement day. Finally, I demonstrate that dual-holders' trades generate excess returns only in firms with low FRQ, suggesting that investors become dual-holders in firms with low FRQ because informed trades in such firms offer higher returns. JEL Classifications: G14; M41.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 35 citations exist upstream.

References

1993Common risk factors in the returns on stocks and bonds 2005Performance matched discretionary accrual measures 2002The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors 2010Understanding earnings quality: A review of the proxies, their determinants and their consequences 1997Disclosure level and the cost of equity capital.2005The market pricing of accruals quality 2004Information and the Cost of Capital 1998The Influence of Institutional Investors on Myopic R&D Investment Behavior

Cited by

2025United in green: Institutional dual ownership and corporate green innovation 2021Institutional Dual-Holders and Managers' Earnings Disclosure 2023Contracting in the Dark: The rise of public-side lenders in the syndicated loan market 2018Is Tax Return Information Useful to Equity Investors?2023Gone with the big data: Institutional lender demand for private information

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.