Tone complexity and the cost of debt retrospective data from the USA

Abstract

Purpose

This paper explores the impact of tone complexity on the cost of debt in the USA.

Design/methodology/approach

A sampling from 692 publicly nonfinancial-traded companies in the USA is employed over the period between 2010 and 2018. Generalized methods of moments (GMM) model is implemented to examine the impact of tone complexity on the cost of debt and its implications upon creditors and users.

Findings

The findings show that high-tone complexity is associated with a greater cost of debt. The use of a more complex tone in a company's annual reports has been shown to influence creditors' perceptions of risk.

Originality/value

This research pursues innovation by examining how creditors can use the tone complexity of annual report to assess the level of information asymmetry and estimate the required rate of return accordingly.

Citation

Bendriouch, F., Jabbouri, I., Satt, H., Jariri, Z. and M'hamdi, M. (2024), "Tone complexity and the cost of debt retrospective data from the USA", Review of Behavioral Finance, Vol. 16 No. 1, pp. 1-16. https://doi.org/10.1108/RBF-02-2022-0064