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Publication Details
AFRICAN RESEARCH NEXUS
SHINING A SPOTLIGHT ON AFRICAN RESEARCH
economics, econometrics and finance
Control/ownership structure, creditor rights protection, and the cost of debt financing: International evidence
Journal of Banking and Finance, Volume 34, No. 10, Year 2010
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Description
We explore the effect of governance on bond yield-spreads and ratings in a multinational sample of firms. We find strong evidence that ultimate ownership (i.e., the voting/cash-flow rights wedge) and family control have a positive and significant effect on bond yield-spreads, and a negative and significant effect on bond ratings. Control in the hands of widely held financial firms has a positive effect on bond ratings only, while State control has no effect on either bond yield-spreads or ratings. We also find that a higher protection of debtholders' rights generally reduces bond yield-spreads and increases bond ratings. Our results additionally show that, for both bondholders and rating agencies, the enforcement of debt laws is crucially important. Finally, we document a negative effect of debt covenants on debt costs when there is a high expropriation risk and poor creditor rights protection. © 2010 Elsevier B.V.
Authors & Co-Authors
Boubakri, Narjess
United Arab Emirates, Sharjah
American University of Sharjah
Canada, Montreal
Hec Montréal
Ghouma, Hatem
Morocco, Ifrane
Al Akhawayn University
Statistics
Citations: 220
Authors: 2
Affiliations: 3
Identifiers
Doi:
10.1016/j.jbankfin.2010.04.006
ISSN:
03784266
Research Areas
Health System And Policy