EXAMINING THE ROLE OF WEB-BASED DISCLOSURE IN MITIGATING DEFAULT RISK- EVIDENCE FROM JAPAN
Date
2025-06-24
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Research Supervisor
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Journal Title
EXAMINING THE ROLE OF WEB-BASED DISCLOSURE IN MITIGATING DEFAULT RISK- EVIDENCE FROM JAPAN
Volume
14
Issue
1
Journal Title
Journal ISSN
Volume Title
Abstract
We examine whether web-based corporate disclosure reduces firms‘ default risk in the unique institutional and governance setting of Japan. Guided by agency and signaling theories, we hypothesize that enhanced online disclosure mitigates information asymmetry, strengthens market credibility, and lowers the likelihood of financial distress. Using 35,920 firm-year observations from 2007–2022, we employ Merton‘s distance-to-default as our primary measure of default risk and capture disclosure quality along four dimensions—massiveness, intelligibility, usability, and information amount—drawn from the NIKKEI Corporate Governance Evaluation System. Firm fixed-effects estimates indicate a robust positive association between disclosure quality and distance-to-default, consistent with lower default probability. The results are robust to alternative accounting- and market-based risk measures (Altman Z-score and CDS spreads) and to alternative estimation techniques. We further show that institutional ownership, analyst coverage, and board independence amplify the risk-reducing effect of web disclosure. Our findings contribute to the corporate disclosure and default risk literatures by isolating the role of dynamic, multidimensional web-based disclosure and by documenting its interaction with external governance mechanisms.