Annual Report Length And The Cost Of Bank Loans

With the information disclosure system being standardized in the world,accounting objectives transform from accountability view into decision-usefulness view.The disclosure of a large number of non-financial information make the annual report length appear to increase rapidly in China,and the trade-off of"full disclosure"and"concise disclosure" become an important topic.Scholars do many researches on the economic consequences of annual report length and readability,but relevant researches based on China are still limited.So we attempt to investigate the economic impact of Chinese annual report length with the perspective of cost of bank loans.Using 17,504 firm-year observations of Chinese A-share listed companies from 2004 to 2017,we investigate the empirical impact of annual report length on cost of bank loans and find that:(1)Companies with longer annual report length have lower cost of bank loans,which means the longer annual reports will help them to establish a positive impression,and reduce the information asymmetry with banks.It satisfies to banks' information requirements and helps to reduce the extra payment for information risk.(2)The negative association is more pronounced in the monetary policy tightening period,in smaller companies,in companies hiring non-big 4 auditors and in companies without political connections.The above conclusions are robust after controlling for the endogeneity problem,main variable measurement,and estimation method choice.Furthermore,we find that after we standardize the information disclosure system,the annual report length is more effective in reducing the cost of bank loans.While the detailed disclosure is also conducive to reducing the cost of equity capital.This paper has two contributions.In terms of theoretical value,we investigate the economic impact of the annual report length on cost of bank loans in China firstly,which enrich the relevant literatures.In terms of practical enlightenment,we reveal the intrinsic motivation of the increasing annual report length,which is to cater to the information requirements of banks to reduce the cost of loans.Meanwhile it helps to guide relevant supervision department to make scientific information disclosure system.