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.

Managerial Ability, Credit Ratings, and the Cost of Debt

2014 ◽  
Author(s):  
Kimberly Rodgers Cornaggia ◽  
Gopal V. Krishnan ◽  
Changjiang (John) Wang
Keyword(s):  
Credit Ratings ◽  
Cost Of Debt ◽  
Managerial Ability ◽  
The Cost

No-Fly Zone in the Loan Office: How Chief Executive Officers’ Risky Hobbies Affect Credit Stakeholders’ Evaluation of Firms

2021 ◽  
Author(s):  
Bo Ouyang ◽  
Yi Tang ◽  
Chong Wang ◽  
Jian Zhou
Keyword(s):  
Chief Executive Officers ◽  
Default Risk ◽  
Chief Executive ◽  
Bank Loans ◽  
Bank Loan ◽  
Cost Of Debt ◽  
Data Set ◽  
Work Related ◽  
Executive Officers ◽  
The Impact

The extant research has often examined the work-related experiences of corporate executives, but their off-the-job activities could be just as insightful. This study employs a novel proxy for the risky hobbies of chief executive officers (CEOs)—CEOs’ hobby of piloting a private aircraft—and investigates its effect on credit stakeholders’ evaluation of the firms led by the CEOs as reflected in bank loan contracting. Using a longitudinal data set on CEOs of large United States-listed firms across multiple industries between 1993 and 2010, we obtain strong evidence that bank loans to firms steered by CEOs who fly private jets as a hobby tend to incur a higher cost of debt, to be secured, to have more covenants, and to be syndicated. These effects are mainly driven by banks, which perceive such firms as having a higher default risk. These relationships become stronger when the CEO is more important to the firm and/or can exercise stronger control over decision making. Supplemented by field interviews, our results are also robust to various endogeneity checks using different experimental designs, the Heckman two-stage model, a propensity score-matching approach, a difference-in-differences test, and the impact threshold of confounding variables.

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.

scholarly journals ESG Scores and the Credit Market

2020 ◽  
Vol 12 (8) ◽  
pp. 3456 ◽  
Author(s):  
Ga-Young Jang ◽  
Hyoung-Goo Kang ◽  
Ju-Yeong Lee ◽  
Kyounghun Bae
Keyword(s):  
Small Firms ◽  
Credit Rating ◽  
Credit Ratings ◽  
Debt Financing ◽  
Corporate Bond ◽  
Cost Of Debt ◽  
Rating Agencies ◽  
Bond Returns ◽  
The Cost ◽  
The Relationship

This study analyzes the relationship between Environmental, Social and Governance (ESG) scores and bond returns using the corporate bond data in Korea during the period of 2010 to 2015. We find that ESG scores include valuable information about the downside risk of firms. This effect is particularly salient for the firms with high information asymmetry such as small firms. Interestingly, of the three ESG criteria, only environmental scores show a significant impact on bond returns when interacted with the firm size, suggesting that high environmental scores lower the cost of debt financing for small firms. Finally, ESG is complementary to credit ratings in assessing credit quality as credit ratings cannot explain away ESG effects in predicting future bond returns. This result suggests that credit rating agencies should either integrate ESG scores into their current rating process or produce separate ESG scores which bond investors integrate with the existing credit ratings by themselves.

scholarly journals DO PUBLIC AND PRIVATE DEBT LEVELS AFFECT THE SIZE OF FISCAL MULTIPLIERS?

2017 ◽  
Vol 32 (3) ◽  
pp. 209
Author(s):  
Chairul Adi
Keyword(s):  
Public Investment ◽  
The Other ◽  
Public Expenditures ◽  
Fiscal Policies ◽  
Data Set ◽  
Private Debt ◽  
Public And Private ◽  
Economic Output ◽  
Other Hand ◽  
The Impact

This paper investigates the effectiveness of fiscal policies – as measured by the impact and cumulative multipliers – and how they interact with public and private debt. Harnessing the moderated panel regression approach, based on the yearly data set of several economies during the period from 1996 to 2012, the analysis is focused on the impact of spending-and-revenue-based fiscal policies on economic growth and how these fiscal instruments interact with public and private indebtedness. The result of spending stimuli advocates the basic Keynesian theory. An increase in public expenditures contemporaneously generates a positive multiplier, of around 0.29 – 0.44 and around 0.45 – 0.58 during two years. Decomposing the expenditures into their elements, this paper documents a stronger impact from public investment than that from government purchases. On the other hand, the revenue stimuli seem to follow the Ricardian Equivalence Hypothesis (REH), arguing that current tax cuts are inconsequential. The impact and cumulative multipliers for this fiscal instrument have mixed results, ranging from -0.21 to 0.05 and -0.26 to 0.06, respectively. Moreover, no robust evidence is found to support the argument that government debt moderates the effectiveness of fiscal policies. The size of the multipliers for both spending and revenue policies remain constant with the level of public debt. On the other hand, private debt appears to show a statistically significant moderating effect on spending stimuli. Its impact on spending multipliers, however, is economically insignificant. The moderation effect of private debt on the revenue stimuli does not seem to exist. Finally, this paper documents that both public and private debt exhibit a negative and statistically significant estimation for economic output.

scholarly journals Wpływ wielkości banku na jego efektywność: badania dla krajów Europy Środkowo-Wschodniej

2015 ◽  
Vol 2 (3) ◽  
pp. 81-96
Author(s):  
Katarzyna Mikołajczyk
Keyword(s):  
Positive Relationship ◽  
Soft Information ◽  
Financial Resources ◽  
Scale Efficiency ◽  
Data Envelopment ◽  
Technological Changes ◽  
East European ◽  
Using Data ◽  
The Cost ◽  
The Impact

Although there is a growing body of literature on the impact of bank size on itsstrategy, efficiency, profitability and stability, the results are still inconclusive. Themain advantages of large banks are their capability for product and geographicaldiversification, ability to bear the cost of technological changes and easier accessto financial resources. On the other hand, small banks have a good understandingof local markets, use soft information on their clients more effectively, are basedon relationship banking model, and have much simpler organizational structure.The aim of this paper is to analyze the impact of bank size on its efficiency in Centraland East European countries. For that purpose, all commercial banks fromCEE countries were divided into four groups, depending on their size (expressedin absolute and relative terms). Technical and scale efficiency scores for the period2004–2013 were calculated using Data Envelopment Analysis. The main conclusionis that in CEE countries bank size affects the efficiency, particularly if thesize is expressed in absolute terms. There is a positive relationship between banksize and its technical efficiency (especially above a certain limit). The relationshipbetween bank size and scale efficiency is nonlinear: the smallest and the largestbanks have higher scale inefficiency.

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