The impact of narrative disclosure readability on bond ratings and the cost of debt

2017 ◽  
Vol 22 (2) ◽  
pp. 608-643 ◽  
Author(s):  
Samuel B. Bonsall ◽  
Brian P. Miller
Keyword(s):  
Cost Of Debt ◽  
Bond Ratings ◽  
Narrative Disclosure ◽  
The Cost ◽  
The Impact

scholarly journals The impact of positive operating cash on bonds’ pricing international evidence

2015 ◽  
Vol 12 (4) ◽  
pp. 708-717 ◽  
Author(s):  
Harit Satt
Keyword(s):  
Cash Flow ◽  
Cost Of Debt ◽  
Probit Regression ◽  
Cash Balance ◽  
Bond Ratings ◽  
International Evidence ◽  
Cash Flow Statement ◽  
The Cost ◽  
The Impact ◽  
The Relationship

This paper aims to ascertain the relationship existing between the ratings of bonds and the ending cash balance of the operating section in the cash flow statement. In our study, which lasted for 18 years, 600 companies were selected from 26 countries to construct our sample. With purpose of detecting how the positive cash balance of the operating section in the cash flow statement characters the likelihood of rising the bonds ratings, we have applied a Probit regression analysis. Consequently, a robust proof stating that the bonds ratings are significantly impacted by the positive operating cash balance. That is to say, generating enough cash flow from the operating activities increases the company’s chances to have greater bonds ratings raises, meanwhile lowering the cost of debt given that higher bond ratings decreases the cost of company for raising funds (in the form of bonds). More confirmation to the creditors’ rights shields was added through our outcomes, in addition to its impact on the cost of debt.

Does opening high-speed railways affect the cost of debt financing? A quasi-natural experiment

2020 ◽  
Vol 10 (4) ◽  
pp. 473-496
Author(s):  
Hongling Guo ◽  
Keping Wu
Keyword(s):  
High Speed ◽  
Geographical Location ◽  
Debt Financing ◽  
Cost Of Debt ◽  
High Speed Railway ◽  
Content Type ◽  
Financing Cost ◽  
Debt Market ◽  
The Cost ◽  
The Impact

PurposeThis study aims to investigate how opening high-speed railways affects the cost of debt financing based on China's background.Design/methodology/approachUsing panel data on Chinese listed firms from 2008 to 2017, this study constructs a quasi-natural experiment and adopts a difference-in-difference model with multiple time periods to empirically examine the relation between the high-speed railway openings and debt financing cost.FindingsOur results show that opening high-speed railways reduces the cost of debt financing, and this negative correlation is more significant in non-state firms, firms with weaker internal control, and firms that hire non-Big Four auditors. Besides, we explore the impact mechanisms and find that opening high-speed railways improves analyst attention, institutional investor participation, and information disclosure quality, which in turn lowers the cost of debt financing.Research limitations/implicationsThe results imply that the opening of high-speed railways helps to alleviate the information asymmetry and adverse selection between firms and creditors and ultimately reduces the cost of corporate debt financing.Practical implicationsThis paper can inform firms and stakeholders about the impact of opening high-speed railways on debt financing cost: it improves the information environment, reduces the geographical location restrictions of debt financing, ensures the reasonable pricing of corporate debt, and thus promotes the healthy and sound development of the debt market.Originality/valueThis paper provides theoretical support and empirical evidence for the impact of infrastructure construction on the information environment of the debt market in China, which enriches the research on the “high-speed railway economy.” In addition, as an exogenous event, the opening of high-speed railways instantly shortens the time distance between firms and external stakeholders, which gives us a natural environment to conduct empirical research, thus providing a new perspective for financial research on firms' geographical location.

Earthly Reward to the Religious: Religiosity and the Costs of Public and Private Debt

2018 ◽  
Vol 53 (5) ◽  
pp. 2131-2160 ◽  
Author(s):  
Feng Jiang ◽  
Kose John ◽  
C. Wei Li ◽  
Yiming Qian
Keyword(s):  
Corporate Culture ◽  
Credit Ratings ◽  
Explanatory Power ◽  
Bank Loans ◽  
Soft Information ◽  
Cost Of Debt ◽  
Private Debt ◽  
Public And Private ◽  
The Cost ◽  
The Impact

We document that a firm’s culture, specifically, its religiosity, affects its cost of debt. Firms in higher-religiosity counties have higher credit ratings and lower debt costs. The impact of religiosity is stronger for firms with greater information asymmetry and during recessions. Further, religiosity has additional explanatory power for the cost of bank loans (but not the cost of public bonds) beyond its impact through ratings. This supports the argument that banks have superior abilities in pricing soft information, such as corporate culture. Finally, the impact of religiosity is stronger when the lender is a small bank.

scholarly journals The impact of financing policy on the cost of debt

2021 ◽  
Vol 18 (4) ◽  
pp. 177-189
Author(s):  
Tetiana Konieva
Keyword(s):  
Capital Structure ◽  
Cost Of Debt ◽  
Financing Policy ◽  
Financing Policies ◽  
Conservative Policy ◽  
Industrial Level ◽  
The Cost ◽  
The Impact ◽  
A Company ◽  
Interest Payments

The cost of debt is a key element to define the amount of the regular interest payments of a company and its business value. It is used for indicators that warn of the economic crisis, which is relevant for the countries where most companies are financially dependent on liabilities. The formalized criteria for the types of financing policy, improved procedure for the cost of debt calculation make it possible to reveal policy with the capital structure that minimizes the cost of debt.The study is based on Ukrainian food processing companies for the period 2013–2020. The studied database was distributed by the types of financing policies: 22% of the cases have a conservative policy, 15% – moderate, 26% – aggressive, 37% – super-aggressive. The results show that the highest weighted cost of debt (24.1%) belongs to the conservative policy, which replaces negative equity by the expensive long-term debts, as well as super-aggressive policy (20.8%) with trade payable that is near half of the capital, and long days payable outstanding. A company can reduce the cost of debt relying on non-interest-bearing liabilities and trade payable if its days payable outstanding are kept at the industrial level or below. Moderate and conservative financing policies, which are based on equity and avoid debts, provide the lowest weighted cost of debt: 2.1% and 1.2%.Thus, choosing the desired type of financing policy for the company, it is possible to form a capital structure that will reduce the cost of debt.

Web-based disclosure and the cost of debt: MENA countries evidence

2020 ◽  
Vol 18 (3) ◽  
pp. 533-561
Author(s):  
Henda Abdi ◽  
Mohamed Ali Brahim Omri
Keyword(s):  
Information Disclosure ◽  
Developed Countries ◽  
Economic Consequences ◽  
Cost Of Debt ◽  
Mena Region ◽  
Web Based ◽  
Content Type ◽  
Mena Countries ◽  
The Cost ◽  
The Impact

Purpose The aim of this study is to investigate the effect of web - based disclosure on the cost of debt for the MENA region setting. Design/methodology/approach The sample of this paper consists of 237 MENA listed non-financial companies for the year 2017. Multiple regression models were used to examine the impact of online disclosure on the cost of debt. Content analysis is used to measure the extent of web-based disclosure. Findings The results reveal that there is a negative and significant association between the web-based disclosure and the company’s cost of debt. These results support the hypothesis of the economic utility of the information disclosed on the website for creditors in this region. Practical implications The results of the study have important implications for managers in the MENA region. It is necessary for managers to improve the company’s transparency through web-based disclosure. The companies must benefit from the different technologies offered by the Internet in order to offer to the creditors unlimited access to up to date information. In fact, web-based disclosure may mitigate the information asymmetry, the uncertainty of creditors and, consequently, reduces the cost of debt. 10; 10;Moreover, the results of the study provide empirical evidence for the advantages of voluntary web-based disclosure. The results highlight the importance to companies and regulators of understanding the benefits of using the website as a means of information disclosure. The regulators in MENA countries can rely on these results to establish suitable policies to improve the quality of web-based disclosure. The regulators need also to put in rules in relation to the online disclosure. In fact, an understanding of web-based disclosure is important for regulators and companies. Given the positive effect of online disclosure (the reduction of the cost of debt), knowledge about the economic consequences of web-based disclosure would enable companies in the MENA region to optimize their online disclosure policies. Originality/value This study, added to the existing literature by examining the consequences of online disclosure practices in MENA countries. Most previous studies conducted in this region were limited to analyzing the determinants of the company’s web-based disclosure. This paper would extend the literature on the online disclosure practices by investigating the association between these practices and the cost of debt in a developing economics: the MENA region. Previous studies were limited to testing this association only in developed countries.

scholarly journals Contingent Convertible Debt: The Impact on Equity Holders

Risks ◽  
2019 ◽  
Vol 7 (2) ◽  
pp. 47 ◽  
Author(s):  
Delphine Boursicot ◽  
Geneviève Gauthier ◽  
Farhad Pourkalbassi
Keyword(s):  
Capital Structure ◽  
Financial Distress ◽  
Cost Of Debt ◽  
Debt Ratio ◽  
Convertible Debt ◽  
Total Cost ◽  
Contingent Convertible Debt ◽  
The Cost ◽  
The Impact ◽  
The Capital Structure

Contingent Convertible (CoCo) is a hybrid debt issued by banks with a specific feature forcing its conversion to equity in the event of the bank’s financial distress. CoCo carries two major risks: the risk of default, which threatens any type of debt instrument, plus the exclusive risk of mandatory conversion. In this paper, we propose a model to value CoCo debt instruments as a function of the debt ratio. Although the CoCo is a more expensive instrument than traditional debt, its presence in the capital structure lowers the cost of ordinary debt and reduces the total cost of debt. For preliminary equity holders, the presence of CoCo in the bank’s capital structure increases the shareholder’s aggregate value.

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