Ownership Structure, Antitakeover Provisions, and the Cost of Debt

We examines whether share pledges by controlling shareholders influence a firm’s cost of debt. We also investigate whether the relationship between share pledges and the cost of debt stems from the managerial risk-taking incentives or pursuing the private benefits of controlling shareholders. We make three major findings. First, we find the cost of debt is higher in firms with share pledges than in firms without share pledges. Furthermore, we identify a positive relationship between the cost of debt and the level of share pledges. Second, we find that there is no increased corporate financial leverage or investment activities in firms with share pledges. Finally, our empirical evidence demonstrates that the positive relationship between share pledges and cost of debt is more pronounced for lower foreign institutional investor stakes or higher controlling shareholders ownership. Overall, the results indicate that share pledges by controlling shareholders negatively affect the cost of debt. However, the effect of share pledges on the cost of debt is differently influenced by a firm’s ownership structure. Our findings suggest that share pledges induce stockholder-bondholder conflict, and the bondholder requires more risk premium due to the decrease of firm value.

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Corporate Governance Index, Corporate Ownership Structure and Audit Committee on Debt Costs

Muhammadiyah Riau Accounting and Business Journal ◽

10.37859/mrabj.v1i2.1927 ◽

2020 ◽

Vol 1 (2) ◽

Author(s):

Siti Nur Azizah ◽

Yulia Nurcahyani

Keyword(s):

Corporate Governance ◽

Ownership Structure ◽

Audit Committee ◽

Stock Exchange ◽

Investment Decision ◽

Linear Regression Analysis ◽

Secondary Data ◽

Cost Of Debt ◽

Governance Index ◽

The Cost

This study aims to analyze corporate governance index and ownership structure and audit committee on the cost of debt. The study based on agency theory by Jensen and Meckling in 1976. This study use secondary data derived from financial statements of companies participating in the Corporate Governance Perception Index (CGPI) for 2014-2018 which are listed on the Indonesia Stock Exchange. The method of data collection in this study used purposive sampling. The data was analyzed by multiple linear regression analysis. The results of this study indicate that corporate governance index and institutional ownership negatively effect on the cost of debt. In contrast, audit committee and managerial ownership has no impact on the cost of debt. The findings in this study can be beneficial for investors in assessing the governance of a company in managing its debt. Investors can consider for an investment decision both long term and short term.

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The Influence of Ownership Structure and Board Independence on the Cost of Debt in BRIC Countries

SSRN Electronic Journal ◽

10.2139/ssrn.3354460 ◽

2019 ◽

Author(s):

Anastasia N. Stepanova ◽

Olga Kopyrina

Keyword(s):

Ownership Structure ◽

Cost Of Debt ◽

Board Independence ◽

Bric Countries ◽

The Cost

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Control/ownership structure, creditor rights protection, and the cost of debt financing: International evidence

Journal of Banking & Finance ◽

10.1016/j.jbankfin.2010.04.006 ◽

2010 ◽

Vol 34 (10) ◽

pp. 2481-2499 ◽

Cited By ~ 99

Author(s):

Narjess Boubakri ◽

Hatem Ghouma

Keyword(s):

Ownership Structure ◽

Debt Financing ◽

Cost Of Debt ◽

Creditor Rights ◽

Rights Protection ◽

International Evidence ◽

The Cost

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Do ownership structure and quality of financial information affect the cost of debt of Tunisian listing firms?

International Journal of Critical Accounting ◽

10.1504/ijca.2017.084891 ◽

2017 ◽

Vol 9 (2) ◽

pp. 140

Author(s):

Aida Sy ◽

Lamia Jamel ◽

Abdelkader Derbali

Keyword(s):

Ownership Structure ◽

Financial Information ◽

Cost Of Debt ◽

The Cost

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CSR and cost of capital: evidence from Japan

Social Responsibility Journal ◽

10.1108/srj-10-2016-0170 ◽

2017 ◽

Vol 13 (4) ◽

pp. 798-816 ◽

Cited By ~ 9

Author(s):

Megumi Suto ◽

Hitoshi Takehara

Keyword(s):

Ownership Structure ◽

Capital Market ◽

Cost Of Capital ◽

Corporate Social Performance ◽

Weighted Average ◽

Cost Of Debt ◽

Cost Of Equity ◽

Content Type ◽

Stakeholder Relationships ◽

The Cost

Purpose This study aims to examine the link between corporate social performance (CSP) and the cost of capital of Japanese firms in 2008-2013, considering the influences of banking relationships and ownership structure. Design/methodology/approach It examines the relation between CSP and the cost of capital in terms of the cost of debt, cost of equity and weighted average cost of capital, using a composite CSP measure based on stakeholder relationships. A regression model is adopted, controlling for bank dependency, ownership structure and firm-specific attributes. Findings Institutional ownership influences the CSP–cost of equity relation and reduces the cost of equity, while CSP is perceived by debtors as not information-mitigating for the observed period. For 2008-2010, the relation between CSP and bank dependency increases the cost of debt; however, the positive influence of bank dependency on the cost of debt dilutes during 2010-2013 as the shift to a more market-oriented financial market in Japan occurs. Practical implications Although bank borrowing is important, especially for small firms, non-financial disclosure makes external financing more flexible. Institutional investors concerned about the non-financial aspects of business, therefore, play an important role in mitigating the information asymmetry that exists in the capital market. Originality/value This study extends research on the CSP–cost of capital link by considering structural changes in financial systems (e.g. capital market perception of CSP and banks as delegated monitors).

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