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.

The effects of audit quality on the costs of capital of firms in Ghana

2018 ◽  
Vol 16 (4) ◽  
pp. 639-659 ◽  
Author(s):  
William Coffie ◽  
Ibrahim Bedi ◽  
Mohammed Amidu
Keyword(s):  
Audit Quality ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
Low Cost ◽  
Cost Of Debt ◽  
Future Research ◽  
Content Type ◽  
Listed Firms ◽  
Financial Firms ◽  
The Cost

PurposeThis paper aims to investigate the effects of audit quality on the cost of capital in Ghana.Design/methodology/approachNon-financial firms listed on the Ghana Stock Exchange (GSE) as well as non-listed firms from the database of Ghana Club 100 were included in the sample. Series are yearly, covering a sample of 40 firms during the six-year period, 2008-2013. The study employed the positivist research paradigm to establish the relationship between audit quality and the cost of capital.FindingsThere is evidence to suggest that the cost of debt and the overall cost of capital of firms in Ghana can be explained by the quality of the external auditors. The results also show that the large size of the board is associated with low cost of debt.Research limitations/implicationsThe fact that the choice of quality measure is based on firm size only and other measurements of audit quality could not be measured. Future research may examine how other approaches to measuring audit quality affect cost of capital.Practical implicationsThe results significant for those charged with assurance and regulation, as well as lenders and managers of companies.Originality/valueThe authors investigate how external auditing quality affects the cost of capital of firms operating in Ghana.

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.

Integrated reporting quality and cost of debt financing

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nicola Raimo ◽  
Alessandra Caragnano ◽  
Massimo Mariani ◽  
Filippo Vitolla
Keyword(s):  
Negative Relationship ◽  
Reporting Quality ◽  
Third Party ◽  
Cost Of Debt ◽  
Integrated Reporting ◽  
High Quality ◽  
Content Type ◽  
Listed Firms ◽  
Financial Benefits ◽  
The Cost

PurposeIn recent years, policymakers have increasingly pushed firms to disclose non-financial information. In Europe, integrated reporting (IR) is an increasingly adopted tool to fully comply with the requirements of the Directive 2014/95/EU. This study aims to examine the financial benefits of IR quality and specifically the effect on the cost of debt.Design/methodology/approachA manual content analysis is performed to measure the quality of the information contained in integrated reports. A panel regression model is used to test the effect of the IR quality on the cost of debt on a sample of 399 observations (a balanced panel of 133 European listed firms for the period 2017–2019).FindingsResults demonstrate a negative relationship between IR quality and the cost of debt, showing that firms that provide higher quality integrated reports benefit from access to third party financial resources at better conditions.Research limitations/implicationsThe results of this study offer important implications for managers and policymakers. The capacity of IR quality to allow a cost of debt reduction should push managers to a greater propensity towards transparency and the dissemination of high quality integrated reports. In addition, in light of the benefits connected to the IR quality, policymakers should push towards the adoption of IR as a solution to fulfil the regulatory obligations deriving from Directive 2014/95/EU.Practical implicationsResults show the goodness of IR as an ideal solution to fulfil the obligations imposed by Directive 2014/95/EU. The important financial benefits associated with IR quality make the high quality integrated report an ideal tool capable of fulfilling regulatory obligations and at the same time guaranteeing a reduction in the cost of debt.Originality/valueTo the best of the authors’ knowledge, this is the first work that analyses the relationship between IR quality and cost of debt.

Extending the benefits of ESG disclosure: The effect on the cost of debt financing

2021 ◽  
Author(s):  
Nicola Raimo ◽  
Alessandra Caragnano ◽  
Marianna Zito ◽  
Filippo Vitolla ◽  
Massimo Mariani
Keyword(s):  
Debt Financing ◽  
Cost Of Debt ◽  
The Cost

scholarly journals Does Corruption Lead to Lower Subnational Credit Ratings? Fiscal Dependence, Market Reputation, and the Cost of Debt

2021 ◽  
pp. 1-19
Author(s):  
Maciej Sychowiec ◽  
Monika Bauhr ◽  
Nicholas Charron
Keyword(s):  
Credit Ratings ◽  
National Level ◽  
Negative Relationship ◽  
Cost Of Debt ◽  
Economic Implications ◽  
Sovereign Credit Ratings ◽  
Heterogeneous Effects ◽  
Federal Revenue ◽  
Negative Effect ◽  
Using Data

Abstract While studies show a consistent negative relationship between the level of corruption and range indicators of national-level economic performance, including sovereign credit ratings, we know less about the relationship between corruption and subnational credit ratings. This study suggests that federal transfers allow states with higher levels of corruption to retain good credit ratings, despite the negative economic implications of corruption more broadly, which also allows them to continue to borrow at low costs. Using data on corruption conviction in US states and credit ratings between 2001 and 2015, we show that corruption does not directly reduce credit ratings on average. We find, however, heterogeneous effects, in that there is a negative effect of corruption on credit ratings only in states that have a comparatively low level of fiscal dependence on federal transfers. This suggest that while less dependent states are punished by international assessors when seen as more corrupt, corruption does not affect the ratings of states with higher levels of fiscal dependence on federal revenue.

The Effect of Profitability and Financial Leverage on Cost of Debt Moderated Earnings Management

2021 ◽  
Vol 26 (1) ◽  
pp. 35
Author(s):  
Herman Ruslim, Renny Muspyta
Keyword(s):  
Earnings Management ◽  
Cost Of Debt ◽  
Manufacturing Companies ◽  
Financial Leverage ◽  
Publicly Traded ◽  
Return On Equity ◽  
Publicly Traded Companies ◽  
Negative Effect ◽  
The Cost

This study aims to determine the effect of profitability and Financial Leverage on the Cost of Debt, and the role of Earnings Management as a moderating variable. In this study, profitability is measured by the ratio of return on equity, financial leverage is measured by the proxy debt ratio, earnings management as measured by discretionary accruals, and cost of debt is measured by the ratio of interest expense divided by the average total debt. The population in this study are publicly traded companies listed on the IDX, and the sample used is manufacturing companies listed on the IDX for the 2016-2019 period. Based on the purposive sampling method, the samples obtained were 69 manufacturing companies and 276 observations. The results showed that profitability has a negative effect on the cost of debt, while financial leverage has no effect on the cost of debt, earnings management cannot weaken the negative effect of profitability on the cost of debt and earnings management cannot weaken the negative effect of financial leverage 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.

scholarly journals Debt financing and firm performance: The moderating role of board independence

2020 ◽  
Vol 45 (3) ◽  
pp. 141-151
Author(s):  
Hanh Song Thi Pham ◽  
Duy Thanh Nguyen
Keyword(s):  
Emerging Market ◽  
Debt Financing ◽  
Board Independence ◽  
Data Set ◽  
Listed Firms ◽  
Negative Effect ◽  
And Performance ◽  
The Relationship ◽  
Moderating Role

This article investigates the moderating role of board independence in the relationship between debt financing and performance of emerging market firms. We have used an empirical model in which the firm’s accounting profitability is a dependent variable and the independent variables are debt financing, board independence, the interaction variable made of debt financing and board independence as well as various control variables. Our analysis is based on a panel data set of 300 listed firms in Vietnam between 2013 and 2017. Our study finds that debt financing has a significantly negative effect and that board independence reduces the adverse impact of debt financing on accounting profitability. Our results are consistent across different estimation models and methods.

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.

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