Do corporate bond offering and listing comment letters increase the cost of equity capital?

This study investigates whether comment letters on corporate bond offering and listing affect firms’ cost of equity. Using a sample of Chinese listed firms, we find that both the receipt of comment letters and the intensity of comment letter review increase the cost of equity capital. Further textual analyses reveal positive relations between comments on certain topics and the cost of equity. Mechanism tests suggest that receiving comment letters increases stock investors’ perceived risk, which in turn raises firms’ equity financing costs. Finally, we document that the positive effect of receiving comment letters on the cost of equity capital is more pronounced among firms with high default risk, low information disclosure quality, or high investor attention, but is weakened among firms with high analyst coverage or positive investor sentiment. Overall, our findings offer important implications for both regulators and issuers.