scholarly journals Corporate governance, bankruptcy law and firms’ debt financing under uncertainty

2008 ◽  
Vol 6 (2) ◽  
pp. 47-51 ◽  
Author(s):  
Bruno Funchal ◽  
Fernando Caio Galdi ◽  
Paulo C. Coimbra
Keyword(s):  
Corporate Governance ◽  
Interest Rate ◽  
Debt Financing ◽  
Cost Of Debt ◽  
Bankruptcy Law ◽  
Investment Projects ◽  
Negative Effect ◽  
The Cost ◽  
The Relationship ◽  
Positive Effect

This paper examines the relationship between corporate governance level and the bankruptcy law to such debt variables as firms’ cost of debt and amount of debt under uncertainty (in the Knight´s sense). First we find that the better the corporate governance and the harsher bankruptcy law, the lower the cost of debt. Second, we find that better governance and a harsher bankruptcy laws have a positive effect on debt. As consequence, firms increase their set of investment projects financed by creditors. Finally, uncertainty has a negative effect on terms of debt (higher interest rate and smaller set of financed investment projects) and such effect is stronger for firms with worse corporate governance and for economies with a bankruptcy law that is lenient to debtors.

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.

Tax avoidance, tax risk and the cost of debt in a bank-dominated economy

2018 ◽  
Vol 33 (8/9) ◽  
pp. 683-699 ◽  
Author(s):  
Jost Hendrik Kovermann
Keyword(s):  
Interest Rates ◽  
Design Methodology ◽  
Stock Exchange ◽  
Tax Avoidance ◽  
Research Literature ◽  
Cost Of Debt ◽  
Content Type ◽  
Negative Effect ◽  
The Cost ◽  
The Relationship

Purpose The purpose of this paper is to investigate whether tax avoidance has a positive or negative effect on firms’ cost of debt. It further investigates whether the implications for the cost of debt are different for tax avoidance and tax risk. Design/methodology/approach Based on a sample of 201 firms listed on Frankfurt Stock Exchange from 2009 to 2014, three tests are performed using pooled OLS regression. Controlling for numerous variables that have been found to influence the cost of debt, a first model examines the relationship between tax avoidance and the cost of debt. A second model examines the relationship between tax risk and the cost of debt and a third model interacts tax avoidance with tax risk. Findings The results show that tax avoidance has a negative effect on the cost of debt; however, tax risk increases the cost of debt. These results indicate that creditors generally view tax avoidance as positive and that tax avoidance is not regarded as inherently risky. Although tax avoidance is rewarded by capital markets with lower interest rates, tax risk contributes to higher interest rates. The effect of tax avoidance on the cost of debt depends therefore on the level of tax risk. Originality/value This paper contributes to two distinct strands of research: literature investigating the driving factors behind the cost of debt and literature investigating the consequences of firms’ tax avoidance activities.

Does Corporate Governance Matter to Bondholders?

2005 ◽  
Vol 40 (4) ◽  
pp. 693-719 ◽  
Author(s):  
Mark S. Klock ◽  
Sattar A. Mansi ◽  
William F. Maxwell
Keyword(s):  
Corporate Governance ◽  
Lower Cost ◽  
Bond Market ◽  
Debt Financing ◽  
Cost Of Debt ◽  
Firm Level ◽  
Shareholder Protection ◽  
Level Data ◽  
Firm Level Data ◽  
The Cost

AbstractWe examine the relation between the cost of debt financing and a governance index that contains various antitakeover and shareholder protection provisions. Using firm-level data from the Investors Research Responsibility Center for the period 1990–2000, we find that antitakeover governance provisions lower the cost of debt financing. Segmenting the data into firms with the strongest management rights (strongest antitakeover provisions) and firms with the strongest shareholder rights (weakest antitakeover provisions), we find that strong antitakeover provisions are associated with a lower cost of debt financing while weak antitakeover provisions are associated with a higher cost of debt financing, with a difference of about 34 basis points between the two groups. Overall, the results suggest that antitakeover governance provisions, although not beneficial to stockholders, are viewed favorably in the bond market.

scholarly journals Factors Affecting The Cost of Debt in Companies Listed within Kompas 100

2016 ◽  
Vol 7 (1) ◽  
pp. 17
Author(s):  
Muhamad Septian ◽  
Rosinta Ria Panggabean
Keyword(s):  
Sampling Method ◽  
Institutional Ownership ◽  
Cost Of Debt ◽  
Family Ownership ◽  
Managerial Ownership ◽  
Factors Affecting ◽  
Good Corporate Governance ◽  
Negative Effect ◽  
The Cost ◽  
Positive Effect

This study aims to determine the effect of Good Corporate Governance (GCG) which is proxied through the proportion of independent commissioners, managerial ownership, institutional ownership, quality audits, and family ownership on the cost of debt. The objects of this study are companies listed in Kompas 100 from the period of August 2013-January 2014. The method used to take samples of the study using purposive sampling method. Data analysis methods used are descriptive statistics, the classical assumption test, and hypotheses test. Based on the results of hypothesis testing that performed by using multiple regression analysis at the 0.05 significant level, the results of this study prove that the proportion of independent commissioners has a significant negative effect on the cost of debt. Also, managerial ownership has a significant positive effect on the cost of debt. On the other hand, institutional ownership, quality audits, and family ownership have no significant effect the cost of debt.

scholarly journals GOOD CORPORATE GOVERNANCE AND TAX AVOIDANCE TO COST OF DEBT WITH GROWTH OPPORTUNITYAS MODERATING (Empirical Study on Manufacturing Company and Finance Service Listed in IDX 2015-2019)

2020 ◽  
Vol 5 (2) ◽  
pp. 123
Author(s):  
Sugiyanto Sugiyanto ◽  
Fitri Dwi Febrianti ◽  
Suripto Suripto
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Linear Regression Analysis ◽  
Tax Avoidance ◽  
Cost Of Debt ◽  
Managerial Ownership ◽  
Manufacturing Companies ◽  
Good Corporate Governance ◽  
The Cost ◽  
The Relationship

Principles of good corporate governance can strengthen the relationship between the effect of Tax Avoidance, the Board of Commissioners and Managerial Ownership of the Cost of Debt on manufacturing companies listed on the Indonesia Stock Exchange (IDX). The hypothesis in the study uses the Eviews tool, tested 3 models 1) approach before using partial moderating (2) approach before using simultaneous moderating (3) The moderating growth opportunity.Samples consist of purposive sampling model with multiple linear regression analysis methods. The data used is the company's financial statements for 2015-2019. Research was taken from 28 selected manufacturing companies listed on the Indonesia Stock Exchange (IDX) and found samples 140 financialstatements.The results of observation were obtained partially by Tax Avoidance has a significant effect on the Cost of Debt, the Board of Commissioners has not a significant effect on the Cost of Debt, and Managerial Ownership has a significant effect on Cost of Debt. While simultaneously Tax Avoidance, Board of Commissioners, and Managerial Ownership influence the Cost of Debt. The moderating of growth opportunity strengthens the relationship between Good Corporate Governance and positive coefficient on the cost of debt, strengthened by the Leverage and Size control variables

scholarly journals Signing Auditors’ Foreign Experience and Debt Financing Costs: Evidence for Sustainability of Chinese Listed Companies

2019 ◽  
Vol 11 (23) ◽  
pp. 6615 ◽  
Author(s):  
Hou ◽  
Liao ◽  
Liu ◽  
Xiong
Keyword(s):  
Audit Quality ◽  
Negative Relationship ◽  
Debt Financing ◽  
Cost Of Debt ◽  
Listed Firms ◽  
Foreign Experience ◽  
Financing Costs ◽  
Negative Effect ◽  
The Cost ◽  
Industry Expertise

This study investigates whether signing auditors with foreign experience influence debt financing costs. Using a sample of Chinese listed firms for the period of 2001–2016, this study hand-collects the information of signing auditors’ foreign experience and empirically examines the relationship between signing auditors’ foreign experience and debt financing costs. The empirical results show that signing auditors’ foreign experience is significantly and negatively correlated with debt financing costs, suggesting that signing auditors’ foreign experience improves audit quality, reduces information risk and thereby lowers the cost of debt financing. Further analyses show that the negative effect of signing auditors’ foreign experience on the cost of debt financing is more pronounced in audit firms without industry expertise, suggesting that audit firm industry expertise mitigates the negative relationship between signing auditors’ foreign experience and debt financing costs. These results imply that signing auditors who have foreign experience could serve a significant role in debt financing, which would strengthen firms’ sustainability.

scholarly journals FACTORS THAT AFFECT FINANCIAL DISTRESS IN INDONESIA

2021 ◽  
Vol 9 (9) ◽  
pp. 306-315
Author(s):  
Yoyo Susdaryo ◽  
Nunung Ayu Sofiati ◽  
Ita Kumaratih ◽  
Nandan Limakrisna ◽  
Mohd Hassan Che Haat ◽  
...  
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Financial Distress ◽  
Company Size ◽  
Stimulus Variable ◽  
Negative Effect ◽  
Economic Stimulus ◽  
The Relationship ◽  
Positive Effect

The results show that, it is proven that the variable liquidity and interest rates have a negative effect on financial distress. Meanwhile, the variables of Profitability, Leverage and Company Size have a positive effect on financial distress. While the Economic Stimulus variable is known to be the relationship between all variables of Liquidity, Profitability, Leverage, Company Size and Interest Rate on variables to Financial Distress. This means that company leaders must take into account liquidity, profitability, leverage, company size and interest rates to avoid financial distress.

scholarly journals FACTORS AFFECTING VOLUNTARY DISCLOSURE WITH CORPORATE GOVERNANCE AS MODERATING VARIABLES

2020 ◽  
Vol 28 (1) ◽  
pp. 73-88
Author(s):  
Eny Widayawati ◽  
Moch Dzulkirom ◽  
Ari Darmawan
Keyword(s):  
Corporate Governance ◽  
Firm Size ◽  
Voluntary Disclosure ◽  
Analysis Tool ◽  
Factors Affecting ◽  
Moderating Variables ◽  
Good Corporate Governance ◽  
Negative Effect ◽  
The Relationship ◽  
Positive Effect

Purpose — The purpose of this research is to analyze and prove the influence of independent variables that are proxied by profitability, liquidity, firm size on voluntary disclosure, and moderated by corporate governance variables. Design/methodology/approach — The object of the research is the companies listed on the IDX from 2012 through 2016. This research uses a purposive sampling method involving 45 annual company reports and uses multiple regression and MRA (Moderated Regression Analysis) as a data analysis tool. Findings — The results of this research indicate that there is a significant positive effect between liquidity, firm size on voluntary disclosure, there is a significant negative effect between profitability and voluntary disclosure, and corporate governance moderates the relationship between profitability, liquidity, firm size, and voluntary disclosure. Practical Implications — Companies with high liquidity supported by good corporate governance will reduce voluntary disclosures due to the existence of independent commissioners whose positions are still less influential with the board of commissioners and board of directors, in the other hand, companies with low profitability supported by good corporate governance encourage managers to disclose company information more broadly to convince all stakeholders concerned. Originality/value —

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