We examine the association between readability of ‘Notes to consolidated financial statements' (Notes) in annual reports and corporate bond yield spread. We find that less readable narrative disclosure of Notes is significantly associated with greater bond yield spread. In addition, the...

This study examines the effects of inside debts on a firm's target leverage and explains the low-leverage puzzle (e.g. Graham, 2000) by the over estimation of the target leverage due to neglecting the effects of inside debts. We find that a firm's inside debt affects not only the target...