Please use this identifier to cite or link to this item:
Title: Exploring the Agency Cost of Debt: Evidence from the ISS Governance Standards
Authors: Pornsit Jiraporn
Pandej Chintrakarn
Jang Chul Kim
Yixin Liu
Keywords: Business, Management and Accounting
Economics, Econometrics and Finance
Issue Date: 1-Oct-2013
Abstract: Corporate governance is usually viewed in the context of strengthening shareholder rights and enhancing shareholders' welfare. However, the impact of corporate governance on bondholders is much less understood. We explore how corporate governance influences the cost of debt financing. Using broad governance metrics encompassing fifty governance attributes reported by The Institutional Shareholder Services (ISS), we document that stronger corporate governance is associated with a higher cost of debt. As governance strengthens by one standard deviation, the cost of debt rises by as much as 11 %. The results are robust even after controlling for both firm-specific and issue-specific characteristics. Our results are important because they suggest that corporate governance has a palpable effect on critical corporate outcomes such as credit ratings and bond yields. More importantly, we show that, while corporate governance may mitigate the agency conflict between managers and shareholders, it appears to exacerbate the agency conflict between shareholders and bondholders (the agency cost of debt). © 2012 Springer Science+Business Media, LLC.
ISSN: 09208550
Appears in Collections:CMUL: Journal Articles

Files in This Item:
There are no files associated with this item.

Items in CMUIR are protected by copyright, with all rights reserved, unless otherwise indicated.