●제목 : The Relationship between New Issue of debt Coefficient

●저자 : 김요한(단국대), 김민철(호서대)

●개요 :

Studies of factors affecting the earnings response coefficient (ERC) have long been a theme in capital market research. One lesser researched factor suggested in a series of paper by Dhaliwal, Lee and Fargher (1991) as possibly affecting the ERC is the variable of default risk. In particular, based upon an option theory of risky debt, they predicted, but did not empirically test the hypothesis, that the issue of debt would increase default risk and would lead to a reduction in the ERC.

The purpose of this study is to test this theory using Standard and Poors, US Industrial companies data. The results produced estimates of the ERC with the opposite signs of those expected. The main conclusion of the study is that issues of debt appear to be associated with factors other than default risk and are therefore probably not reliable indicators of that construct. Various possible alternative explanations for the results are discussed.