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This study investigates the influence of corporate governance mechanisms on debt service obligations within the context of 34 automobile companies listed on the Tokyo Stock Exchange from 2006 to 2021, utilizing a purposive sampling approach. Employing a range of statistical models including the random effect model, fixed effect model, and the generalized method of moments (GMM), the study yields several key findings. Firstly, it reveals a significant and positive correlation between the presence of independent board members and the debt service obligations of Japanese automobile firms. Secondly, a noteworthy negative association is uncovered when the CEO holds a dual role, impacting debt service obligations negatively. Thirdly, the inclusion of non-executive board members on corporate boards is found to be linked to a significant and adverse effect on debt service obligations among these firms. Finally, the study underscores the positive impact of board members' knowledge, skills, and the frequency of meetings on the debt service obligations of automobile companies in Japan. [ABSTRACT FROM AUTHOR]

Copyright of Journal of Technology Economics is the property of Chinese Society of Technology Economics and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

I show that the corporate group structure generates tax benefits that create incentives for higher leverage. The tax benefits arise when losses on distressed subsidiaries are tax deductible for a parent firm. Higher tax rates then imply that more of these losses are borne by the government instead of the parent firm, reducing the expected costs of bankruptcy and thereby incentivizing the subsidiaries to take on higher leverage. Using data from a large sample of European multinationals, I show that this tax benefit exists on top of the trade-off theory and debt-shifting effects, and is stronger when deductions of subsidiary losses are more generous. [ABSTRACT FROM AUTHOR]

The determination of the capital structure is a critical component of a company's financial decision-making process. The question of how to optimize a firm's capital structure to increase its value has been a significant topic of interest within the financial community. The employee stock ownership plan (ESOP) has developed rapidly in China's capital market over the past decade, providing a suitable context for studying the impact of employee equity incentives on capital structure decisions. This paper employs cross-sectional ordinary least squares regression models and unbalanced panel fixed effect models to investigate the impact of employee stock ownership plans (ESOPs) on firms' capital structure decisions. The analysis is conducted on a sample of Chinese A-share listed companies on the Shanghai and Shenzhen Stock Exchanges. The research considers both static capital structure choice and dynamic capital structure adjustment. We find that the implementation of an ESOP reduces the level of corporate debt and accelerates the dynamic adjustment of capital structure, suggesting that employee equity incentives play a role in optimizing firms' capital structure decisions. We also find that the impact of ESOPs on the dynamic adjustment of capital structure is asymmetric. Specifically, the implementation of ESOPs markedly accelerates the downward adjustment of capital structure, yet has no impact on the upward adjustment of capital structure. Further analysis demonstrates that the impact of ESOPs on capital structure decisions is contingent upon the macroeconomic environment, industry characteristics, corporate governance, and ESOP contract designs. First, the optimization of ESOPs on capital structure decisions is more pronounced in an economic boom environment, in a poor market climate, or in competitive industries. Second, the reduction effect of ESOPs on corporate debt is more pronounced in non-state-owned companies, high-tech companies and those with lower ownership concentration. In contrast, the acceleration effect of ESOPs on capital structure adjustment is more pronounced in state-owned companies, non-high-tech companies and those with higher ownership concentration. Ultimately, ESOPs financed by loans from a firm's major shareholders—or with a longer lock-up period, smaller shareholding size or executive subscription ratio—demonstrate a more pronounced optimization effect on capital structure decisions. This paper not only contributes to the existing literature on the relationship between equity incentives and capital structure decisions, but also provides guidance for listed companies on the reasonable design of their ESOPs and the optimization of their capital structure decisions. [ABSTRACT FROM AUTHOR]

The traditional legal account of a corporate debtor's journey into and through bankruptcy reorganization naturally focuses on legal rights and entitlements, such as obligations arising under the debtor's existing agreements and rights articulated in the U.S. Bankruptcy Code. But the traditional legal account does little to probe why these prior agreements and transactions were entered into in the first place, and how they interact with the bankruptcy system to generate predictable outcomes. Rather, the traditional legal account applies a presumption that the debtor's financial characteristics, qualities, and features (what this Article calls "restructuring attributes") are not premeditated, at least insofar as a future bankruptcy filing is concerned. In contrast, this Article advances a theory of "tactical restructurings," which acknowledges that corporate debtors engage in deliberate prebankruptcy planning to achieve the ideal restructuring attributes and thus gain significant advantages in a future bankruptcy. By illuminating these understudied aspects of commercial restructurings, this Article contributes to a broader understanding of Chapter 11 bankruptcy as a dynamic rather than static process. Simply by manipulating key variables and inputs that are almost entirely within their control, debtors and their preferred stakeholders control the behavior of the Chapter 11 system and effectively lock in restructuring outcomes. [ABSTRACT FROM AUTHOR]

Existing studies on bond covenants have focused primarily on firm‐level factors and have largely overlooked the influence of the external environment, including the media. Furthermore, previous research on media coverage has failed to consider its impact on the bond market. This study attempts to fill these gaps by examining the impact of media coverage on bond covenants for a sample of Chinese corporate bonds from 2007 to 2017. Our findings reveal a negative relationship between media coverage and the number of bond covenants. Further analysis demonstrates that this negative impact is more pronounced for non‐state‐owned firms, in highly competitive industries, and in regions with a weak legal environment. Additionally, media coverage with a non‐negative tone leads to a reduction in the number of bond covenants. Notably, government‐controlled media exerts a more significant influence than market‐oriented media on bond covenants. Furthermore, both media coverage and bond covenants contribute to lower debt costs and are found to be interchangeable in their effects. Our analysis is robust to corrections for the endogeneity of the relationship between media coverage and bond covenants. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to examine the effect of executive compensation incentives, specifically CEO inside debt holdings, on the choice of industry specialist auditor. Design/methodology/approach: High inside debt holdings are expected to constrain excessive managerial risk-taking and align the interests of managers and outside debtholders. The authors hypothesize that reduced debtholders' expropriation concerns will decrease the demand for high audit quality, measured by industry specialization. The authors investigate a sample of US firms from 2006 to 2018 using OLS regression and use CEO relative leverage to proxy for CEO inside debt holdings. The authors conduct an additional two-stage least squares regression analysis to address potential endogeneity issues. Findings: The paper finds that firms with higher levels of CEO inside debt tend not to appoint an auditor with industry specialization. This result is consistent with the notion that inside debt mitigates agency conflicts between managers and debtholders, reducing the demand for high-quality audits as a monitoring mechanism. The paper also finds that among firms which are excessively leveraged, those with higher levels of CEO inside debt tend to appoint an industry specialist auditor. Originality/value: The findings contribute to the literature on agency cost and auditor choice by demonstrating that CEO inside debt has both substitutive and complementary effects on demand for industry specialist auditors. [ABSTRACT FROM AUTHOR]

The economic institutionalist literature often suggests that sub-optimal institutional arrangements impart unique distortions in China, and excessive corporate debt is a symptom of this condition. However, lax monetary policies after the global financial crisis, and specifically, quantitative easing have led to concerns about debt bubbles under a wide range of institutional regimes. This study draws on data from Chinese listed firms, supplemented by numerous macroeconomic control variables, to isolate the effect of international capital flows from other drivers of firm leverage. We conclude that the rise in, and distribution of, Chinese corporate debt can partly be ascribed to the effects of monetary policy outside of China and that Chinese institutional features amplify these effects. Whilst Chinese firms are affected by developments in the global financial ecosystem, domestic institutional realities and distortions may unevenly add their own particular effects, providing further support for and extending the variegated capitalism literature. [ABSTRACT FROM AUTHOR]

This study investigates whether directors' and officers' liability insurance (D&O insurance) misleads creditors' lending decisions by examining its effect on corporate debt maturity structure. We find that purchasing D&O insurance leads to increased corporate debt maturity, and this effect is more pronounced for firms with weaker corporate governance. These results suggest that creditors may view D&O insurance as an external monitoring tool that helps improve corporate governance. However, D&O insurance induces higher firm risk, but cannot help decrease agency costs or improve firm performance, that is, it results in more severe managerial opportunism. Our findings suggest that D&O insurance, to some extent, misguides creditors' lending decisions. [ABSTRACT FROM AUTHOR]

Copyright of Taiwan Economic Forecast & Policy is the property of Institute of Economics, Academia Sinica, Taiwan Economic Forecast & Policy and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Using debt structure data from a large sample of US non-financial companies during the period 2002–2016 combined with the US Department of Justice (DOJ) data on local public corruption, we examine the effect of public corruption on the degree of debt concentration in a firm's debt structure. The results imply that firms in corrupt areas tend to use several debt types simultaneously, decreasing in that way debt concentration. These findings remain robust to tests that control for endogeneity. In further analysis, we show that these results are stronger for more informationally transparent firms, i.e. investment grade rated and publicly listed firms, that have easier access to capital debt markets. Lastly, in terms of debt choices, we find that firms in corrupt areas issue more commercial paper, senior bonds and capital leases, while they borrow less from banks. The study provides useful policy implications for combating corruption, as informationally opaque firms face increased barriers to debt financing. [ABSTRACT FROM AUTHOR]

Using a standardized methodology, we empirically evaluate 55 proposed determinants of capital structure in terms of statistical significance, economic significance, and identification. We find that robust and economically important determinants of debt ratios are relatively few in number. Nevertheless, because each determinant relates to one of five market imperfections—taxes, distress costs, information asymmetry, agency costs, or supply frictions—we draw conclusions from the evidence as a whole regarding the explanatory power of different capital structure theories. We find greater support for pecking order theory and supply-related theories, with less support for traditional tradeoff theory and agency theory. [ABSTRACT FROM AUTHOR]

Hand-collecting credit line drawdowns that firms classify as long-term debt, we first document how long-term drawdowns rise with high investment needs or weak external capital market conditions. Nearly all drawdown proceeds finance long-term investment, including M&A activity. Unrated and lower-rated firms rely more on long-term drawdowns than high or very poorly rated firms. We further find that credit lines have tighter covenants than terms loans. Drawdowns are repaid fairly quickly and often refinanced with other long-term debt. Our findings support the monitored liquidity insurance theory of credit lines and highlight that long-term drawdowns act as a valuable bridge financing mechanism. [ABSTRACT FROM AUTHOR]

This article makes a key contribution to the comparative political economy literature by accounting for the macroeconomic role of household finance. Based on post-Keynesian theories of finance and the financialization literature, we place house prices and mortgage credit squarely at the center of the macroeconomy, as speculative house price cycles can facilitate homeowner consumption via the use of equity release mortgages. Through an econometric evaluation of eighteen advanced economies from 1980 to 2019, we demonstrate that household debt is determined by house price inflation, and that rising household debt contributes to GDP growth, while business debt has negative growth effects. These results are consistent across countries with different growth models and financial systems. This suggests that the varieties of capitalism's focus on corporate finance is misplaced and that the growth models approach needs a theory of house prices, mortgage credit, and financial cycles to adequately conceptualize how debt-driven growth operates across advanced economies. [ABSTRACT FROM AUTHOR]

The Goodwin–Keen model was introduced to study the structural instability of debt-financed economies. Despite its theoretical appeal, no empirical study has focused on this model to date. Using u.s. data for non-financial firms over the period 1959–2019, this paper tests the empirical validity of a Goodwin–Keen model accounting for dividends. We propose a two-step procedure to simultaneously estimate parameters and quantify their uncertainty. The model satisfactorily captures the historical cycles in the wage share and employment rate, while reflecting the trend growth in the debt-to-output ratio. The estimation provides meaningful parameters, although their large uncertainty suggests that the model fails to fully account for the private debt dynamics. The estimated model assigns a probability of at most 11% to the occurrence of a private-debt overhang over the 21st century. However, it would have failed to foretell the Global Financial Crisis. Further work is therefore needed to improve its prospective capacity. • A new estimation strategy is used to estimate the parameters of a Goodwin–Keen model for the United-States (1959-2019). • The model captures the historical wage-share, employment rate and corporate debt-to-output ratio trajectories. • The model's behavior is discussed based on prospective simulations and a backtesting over the 2008 crisis period. [ABSTRACT FROM AUTHOR]

The development of technology has led to the widespread use of digital technology in tax enforcement. Using the Chinese digital tax enforcement reform as a quasi-natural experiment, this study shows that digital tax enforcement reduces the risk of debt default by improving accounting information quality and reducing agency costs. Further analysis shows that this impact is more significant in enterprises with poorer external information environments, lower internal control quality, lower customer concentration, and lower digitalization levels. This study enriches the research on the economic consequences of digital tax enforcement. This has practical implications for the government when using information technology to strengthen tax administration. [ABSTRACT FROM AUTHOR]

In the framework of law and finance literature, this study investigates the link between judicial efficiency and financial debt cost in 1487 non‐financial firms across the euro zone from 2010 to 2021. Utilizing qualitative (rule of law) and quantitative (judicial proceeding length) indicators from the Worldwide Governance Indicators and Doing Business databases, our findings support the hypothesis that efficient justice lowers financial debt cost. Additionally, we observe a moderating effect of debt structure, specifically that private non‐bank debt enhances the reduction impact of judicial efficiency on debt cost, unlike bank and corporate bonds debt. [ABSTRACT FROM AUTHOR]

This study examines the impact of twin agency problems (political corruption and minority shareholders' expropriation) on corporate debt management policies across a large number of countries. Our results show that in more corrupt countries, managers are more likely to shield liquid assets from potential political extraction by maintaining a higher level of leverage. This effect is magnified by the protection of shareholders' rights. We further show that twin agency problems influence not only the level of debt in capital structures but also other aspects of debt management, including debt maturity, deviation from optimal leverage, capital structure stability, and the leverage speed of adjustments. The findings are robust due to their inclusion of different measures of corruption and a wide range of firm-level and country-level characteristics. Our study has implications for policymakers, as we show that the improvement of the country-level institutional environment and, particularly, addressing corruption can lead to more effective debt management by firms, ultimately resulting in higher firm values. [ABSTRACT FROM AUTHOR]

AbstractWe collected data on the duration of outbreaks in Chinese cities from the websites of National, Provincial, and Municipal Healthcare Commissions as our primary source. Our aim is to investigate the impact of debt maturity structure on COVID-19 shocks. We conducted statistical analyses based on different levels of debt maturity and the severity of the shocks. Subsequently, we empirically tested the mitigating effect of debt maturity structure on pandemic shocks using a fixed-effects model. Our findings reveal that pandemic shocks heighten firms’ business risk. However, extending the debt maturity structure significantly alleviates the impact of these shocks. Robust benchmark results were obtained through instrumental tests employing instrumental variables, PSM-DID, and placebo methods. Mechanism tests demonstrate that extending debt maturity helps in mitigating maturity mismatches, reducing debt financing costs, and alleviating financing constraints. Further analysis indicates that the pandemic mitigating effect of debt maturity structure is more pronounced among firms with lower degrees of marketization and governance, particularly among private firms. Our study contributes to the micro-level understanding of the economic repercussions of major pandemic disasters and enriches research on firm risk from the standpoint of capital structure. [ABSTRACT FROM AUTHOR]

En este artículo se investigaron los efectos del descalce cambiario en los beneficios de 201 empresas no financieras brasileñas que cotizan en bolsa, en el período de 2010 a 2018. Se construyó una medida de descalce cambiario a partir de la recopilación de los valores de contratos de derivados de divisas, con los que se creó una base de datos inédita. Los resultados indican que la devaluación del tipo de cambio tiene un efecto diferencial negativo para las empresas endeudadas en moneda extranjera, incluidas las empresas exportadoras. Al controlar por variables que protegen a las empresas endeudadas en moneda extranjera, se observa que el efecto diferencial de la devaluación es negativo para las empresas con mayor pasivo en moneda extranjera y positivo para las empresas con mayor activo en moneda extranjera o mayor nivel de cobertura (hedge). Estos resultados son robustos a diferentes especificaciones. [ABSTRACT FROM AUTHOR]

Summary: How do corporate debt booms affect investment? Using US firm‐level data over 1984Q1–2019Q4, and an instrument for firm‐specific debt booms that exploits systematic differences in firms' exposure to industry‐level debt booms, I find that debt booms cause investment growth to decline over the medium term. This result is driven by the financial constraints channel: Vulnerable firms experience a higher cost of debt in the short run, lower stock returns, and an increase in indicators proxying financial risk. Vulnerable firms also cut their investment spending after a debt boom, irrespective of their growth opportunities. Finally, I find that congestion effects from vulnerable firms on healthy firms are amplified during debt booms, stressing the risk that debt booms in a subset of firms may spill over to the rest of the economy. [ABSTRACT FROM AUTHOR]

A reasonable leverage ratio is conducive to the sustainable development of the enterprise. During the green transformation stage of China's economic structure, improving the relevant credit policies to support green development has become an urgent need for the relevant government departments in China. This study first systematically analyzes the influence of excessive debt on green technology innovation (GTI) using the data of China A-share listed companies from 2007 to 2020. The empirical results showed that the excessive debt of enterprises significantly restricted their GTI. Excessive debt had a significant negative impact on the GTI of non-state owned enterprises (non-SOEs) and enterprises that did not implement the ISO 14001 environmental management system (EMS) certification. However, its impact on SOEs and enterprises adopted the ISO 14001 EMS was insignificant. The excessive debt mainly inhibited enterprise innovation by affecting the R&D investment of enterprises and raising the debt cost of enterprises. This study supplemented the relevant studies on the economic consequences of corporate debt deviation with different enterprises. [ABSTRACT FROM AUTHOR]

This study explores the effects of banking uncertainty on firms' debt financing. Employing data from 2007 to 2022 of Vietnam–a bank-based economy, we document that banking uncertainty negatively impacts corporate debt. The impact firmly holds across various debt maturities and sources, with the most predominant driver witnessed in bank debt. We also investigate the potential underlying mechanism linking banking uncertainty to debt financing, thereby validating the working of three crucial channels, including increased costs of debt, substitution of trade credit, and contractions in firm investment. Furthermore, conducting extended analysis, we find that debt financing exhibits more pronounced reactions to banking uncertainty for firms with closer ties to banks or during macroeconomic shocks, as captured by the financial crisis and the COVID-19 pandemic. Our findings survive after robustness checks by alternative measurement, static and dynamic econometric models, and endogeneity controls. [ABSTRACT FROM AUTHOR]

The Merton (On the pricing of corporate debt: The risk structure of interest rates. J. Finance, 1974, 29, 449–470) model is often considered the simplest structural model of default. Its famous modification developed by KMV is also widely used and well understood by both practitioners and academics. However, as the underlying asset process is driven by a diffusion process, the Merton model suffers from the well-known issue of the vanishing of credit spreads for progressively shorter maturities. To overcome such shortfall, several modifications have been proposed in the literature; however, none of these, despite succeeding at better pricing spreads and explaining default dynamics, are able to retain the simplicity of the Merton model. In this paper, we propose a new structural model of default driven by an additive process whose pricing formulas are as simple as – if not even simpler than – those of the Merton model. We named such model the Carr model of default after Peter Carr, given his recent passing and the fact that the underlying asset distribution is the one introduced in Carr and Torricelli (Additive logistic processes in option pricing. Finance Stoch., 2021, 25, 689–724) and Carr and Maglione (Compound option pricing and the Roll-Geske-Whaley formula under the conjugate-power Dagum distribution. J. Deriv., 2022, 31, 1–32). We first provide pricing formulas for the firm's claims and credit spreads, and then discuss a general theory of change of measure for such processes in order to introduce a distance-to-default version of this newly-introduced model. Finally, we empirically test the Carr versus the Merton model and document the far better ability of the Carr model to reproduce CDS spreads as well as explain their cross-sectional and time-series variation. [ABSTRACT FROM AUTHOR]

We investigate the relation between sovereign and corporate bond issuance. Sovereign bond issues that increase a country's maximum maturity are followed by increases in the maximum maturity of corporate issues. Our results point to issuance complementarities based on the benchmarking of corporate bonds to sovereign bonds. Sovereign and corporate bond issues are also substitutes, but substitutability requires the availability of a high-quality sovereign bond benchmark. By adding to existing theories focusing on substitutability, our findings highlight the role that the maturity of sovereign debt plays in capital market development. [ABSTRACT FROM AUTHOR]

PT SMART Tbk was established on June 18, 1962, as PT Airline Plantation Sumcama Padang Halaban and commenced its commercial activities in the same year. Expanding the company's land holdings indicates its classification as a lucrative entity. Upon examining the company's financial statistics, two potential outcomes emerge: positive or negative. Since it does not eliminate the potential for expansion to be funded by corporate debt, this research aims to conduct a financial performance analysis of PT Sinar Mas Agro Resources and Technology Tbk. The research utilizes documentation analysis as the data collection approach, specifically gathering financial data from firm-published documents on the Indonesian Stock Exchange. PT SMART Tbk's primary objective is to enhance its current assets and cash reserves, reduce liabilities, grow its overall assets, meet its existing debt obligations, and improve its financial performance. Research is conducted to enhance firm performance by boosting sales, capital, and assets. [ABSTRACT FROM AUTHOR]

This study aims to determine the impact of Debt Rating Mediation on ESG Score and Cost of Corporate Debt in Indonesia for the 2018-2023 Period. This research is included in quantitative research with data collection in the form of secondary data from those available to the public (Indonesia Stock Exchange) and refinitiv. The type of data used is cross section data. The sample in this study amounted to 235 bond data from 22 companies on the IDX issued in 2018-2023. The type of data used is cross section data. The results of the study showed that the performance of ESG scores, debt ratings, status of SOEs, and decarbonization acceleration regulations have an influence on the cost of corporate debt. Then debt ratings fully mediate the relationship between ESG scores and corporate debt costs. [ABSTRACT FROM AUTHOR]

Copyright of Business Administration Quarterly / Kwartalnik Nauk o Przedsiebiorstwie is the property of SGH Warsaw School of Economics and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper identifies how a rise in the deficit/debt impacts interest rates by looking at the high‐frequency response of interest rates to fiscal surprises. The fiscal surprises are the unexpected components of deficit releases and the changes in official forecasts by the Congressional Budget Office and by the Office of Management and Budget. The paper estimates that a rise in the deficit‐to‐GDP ratio of 1 percentage point raises the 10‐year nominal interest rate by 8.1 basis points. The response is similar quantitatively for other Treasury maturities and for corporate debt interest rates. The paper also investigates which theoretical channel drives this relationship, and whether surprises affect interest rate expectations or the term premium. These results are used to estimate how recent spending may have affected interest rates. This paper is part of the Economica 100 Series. Economica, the LSE "house journal" is now 100 years old. To commemorate this achievement, we are publishing 100 papers by former students, as well as current and former faculty. Christopher David Cotton obtained his BSc from the LSE. [ABSTRACT FROM AUTHOR]

Business credit supply entails a firm providing credit to its customers as a means to gain a competitive edge. The advent of the digital economy has brought about profound changes in business practices. In this context, it becomes crucial to examine how the digital economy impacts the business credit supply of enterprises. This study employs a theoretical framework to derive insights and carries out an empirical analysis using the City Digital Economy Development Index spanning from 2008 to 2021, along with data from A-share listed companies in Shanghai and Shenzhen. The objective is to explore the influence of the digital economy on corporate business credit supply and its underlying mechanisms. The findings reveal that the digital economy can enhance corporate business credit supply by reducing the incidence of bad debt, thus enabling companies to extend more credit to their customers. This research contributes empirical evidence for understanding the microeconomic impact of the digital economy, while also providing theoretical insights to advance the development of the digital economy and optimize the allocation of financial resources, thereby alleviating corporate financing constraints. [ABSTRACT FROM AUTHOR]

We develop an asset pricing model with endogenous corporate policies that explains how inflation jointly affects real asset prices and corporate default risk. Our model includes two empirically founded nominal rigidities: fixed nominal debt coupons (sticky leverage) and sticky cash flows. These two frictions result in lower real equity prices and credit spreads when expected inflation rises. A decrease in expected inflation has opposite effects, with even larger magnitudes. In the cross-section, the model predicts that the negative impact of higher expected inflation on real equity values is stronger for low leverage firms. We find empirical support for the model's predictions. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

In this study, we examine the effect of worldwide board reforms on the cost of debt financing. We document an increase of loan spread after a country initiates the reform. The increase is larger among firms that are more exposed to shareholder–debtholder conflicts. The results suggest that board reforms empower shareholders at the cost of debtholders. However, we also find that, while the reform component related to board independence leads to the increase in the cost of debt, the component related to audit committee independence helps decrease the cost. [ABSTRACT FROM AUTHOR]

Analyzing hand-collected credit agreements for a sample of middle-market firms over 2010–2015, we find that one-third of all loans are directly extended by nonbank financial intermediaries. Two-thirds of such nonbank lending can be attributed to bank regulations that constrain banks' ability to lend to unprofitable and highly levered borrowers. Firms with negative EBITDA and debt/EBITDA greater than six are 32 |$\%$| and 15 |$\%$| more likely to borrow from nonbanks. These firms pay significantly higher interest rates, especially following the 2013 leveraged loan guidance revisions. Nonbank borrowers also receive different nonprice terms compared to firms borrowing from banks. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

Debt overhang is associated with higher financial fragility and slower recovery from recession. However, while household credit booms have been extensively documented to have this property, we find that corporate debt does not fit the same pattern. Newly collected data on nonfinancial business liabilities for 18 advanced economies over the past 150 years shows that, in the aggregate, greater frictions in corporate debt resolution make for slower recoveries, with weak investment and more persistent "zombie firms" and that this is an important factor in explaining the difference in outcomes relative to household credit booms. [ABSTRACT FROM AUTHOR]

We provide a comprehensive account of the evolution of the currency composition of sovereign and corporate external borrowing by emerging markets from 2003 to 2017. We show that a higher reliance on foreign currency debt by the corporate sector is associated with higher sovereign default risk. We introduce local currency sovereign debt and private sector currency mismatch into a standard sovereign debt model to examine how the currency composition of corporate borrowing affects the sovereign's incentive to inflate or default. A calibration of the model generates the empirical patterns of sovereign credit risk. [ABSTRACT FROM AUTHOR]

In this study, I examine whether public attention to a natural disaster affects the likelihood of firms using external financing (only debt, only equity, or a mix of debt and equity) following the disaster. The helpful (or harmful) view of public attention predicts that increasing public attention to the disaster can help companies to use (or hinder them from using) external financing following the disaster. For this investigation, I construct two indices: (1) an index of public attention to natural disasters and (2) an index of natural disaster intensity. Consistent with the prediction of the helpful view, the likelihood of using a combination of debt and equity financing in the aftermath of a severe disaster is higher when people pay more attention to it. By contrast, when people pay less attention to severe disasters, firms are more likely to use only debt or equity financing, which confirms the harmful view. I provide evidence that the moderating effect of public attention on the relationship between the likelihood of using external financing and natural disaster intensity varies across types of natural disasters and types of online information sources (websites, online news, images, and YouTube videos). Furthermore, smaller firms that often face difficulties obtaining external financing are more likely to benefit from increased public attention to disasters when they want to use only debt financing and less likely to benefit when using equity financing. Finally, I provide evidence that the substitution of internal funding sources for external sources in the aftermath of a disaster depends on the level of public attention to the disaster. [ABSTRACT FROM AUTHOR]

This study explores the relationship between social trust and firm debt maturity mismatch in the Chinese context. Additionally, we investigate the economic mechanisms through which social trust affects debt maturity mismatch, and the differential roles played by social trust among firms with different characteristics. We employ enterprise trustworthiness scores and provincial blood donation rates as our measures of regional social trust level and find a negative relationship between local trust and firm debt maturity mismatch, suggesting that social trust which promotes ethical norms acts as a restraint on firms' propensity for excessive risk. An alternative but consistent explanation is higher social trust increases debtors' willingness to lend, hence it reduces firms' funding costs and consequently the potential cost‐saving motivation behind such a mismatch. We further document evidence that social trust improves the firm information environment and consequently risk‐taking and/or the ability to reduce funding costs. The study also reveals variations in the role of social trust based on firm characteristics, such as leverage and profitability, and the ownership structure (state‐owned enterprises vs. non‐state‐owned enterprises). The findings contribute to the literature by highlighting the increasing importance of social capital for policy and governance. [ABSTRACT FROM AUTHOR]

This article aimed to investigate the relationship between economic policy uncertainty (EPU) and long- and short-term debt of Brazilian firms traded on the Brasil, Bolsa, Balcão (B3) stock exchange. The discrepancy in previous results raises questions about the current understanding of the relationship between debt and EPU. Separate analyses of long- and short-term debt provide different insights into how corporate decisions are affected. This discrepancy challenges our existing understanding of the complex dynamics between debt and EPU. The research sample consists of 163 Brazilian firms listed on the B3 between 2010 and 2019 on a quarterly basis. The baseline models considered long- and short-term debt as endogenous, taking into account firm and country characteristics. We employed a two-stage system generalized method of moments (GMM-sys) panel approach to deal with potential endogeneity in the estimates. As the debt market plays a crucial role in corporate valuation and performance, it is increasingly important to study the dynamics of long- and short-term corporate debt amidst the challenges triggered by the spread of EPU in the business environment. Clarifying how both long- and short-term debt perform under such pressure is particularly relevant since it reinforces already observed and potential implications for corporate adaptability in the use of external funds. The impact of this study lies in revealing the coexistence of firms’ cautious decisions in seeking representative funds and the conservative position for corporate investments regarding uncertainties that surround economic policy. The findings suggest that higher levels of EPU are associated with a decrease in the use of longterm debt and an increase in short-term debt. In response to increased EPU, companies tend to rely less on long-term debt and instead opt for increased use of short-term debt. These results hold consistently across different proposed specificatio [ABSTRACT FROM AUTHOR]

Corporate borrowings being a significant driver of firm's performance and value, have garnered the attention of scholars across the globe. Further, efforts have also been exerted by the scholar community to analyse its determinants as well as its effect on firm performance and value. In this context, this study aims to explore the key areas, most influential authors, widely used keywords, most studied countries and also suggests future research directions in the field of corporate borrowings. This study has used a systematic literature review methodology and bibliometric analysis with a sample of 708 studies taken from both Scopus and Web of Science database over the period from 1994 to 2022. Though these studies have been attempted throughout the world but majority of countries are the new participant in the field of corporate borrowings. The sluggish growth of literature in this field is due to lack of collaboration, focus on cross-country analysis, inter-industry comparison and focus on small firm. Further, the study reveals that though some areas like Capital structure, Debt maturity and Corporate debt have been amply addressed but areas like Cost of debt, Credit risk, Debt structure, Environmental, Social & Governance (ESG), Economic Policy Uncertainty (EPU), Information asymmetry, Corporate bonds and Ownership structure have been given very least attention which can be studied as a future research agenda. [ABSTRACT FROM AUTHOR]

Research Question/Issue: For firms with institutional dual holders, is proxy voting affected by whether the vote is confidential? Does confidential voting affect firms' cost of debt? Research Findings/Insights: Consistent with social exchange theory and reciprocity norms, we find that, in the absence of confidential voting, firms with institutional dual holders gain more favorable votes for proposals and, in particular, for management‐sponsored compensation proposals. Further, these firms pay a higher cost of borrowing. This reciprocity relation does not exist if the firm has confidential voting in place. Theoretical/Academic Implications: The results are consistent with reciprocity norms creating a psychological obligation to repay valuable favors between firm managers and institutional dual holders when proxy votes are not confidential. Practitioner/Policy Implications: The findings support the popular position that confidential voting is in the best interests of shareholders and rigorous external corporate governance. [ABSTRACT FROM AUTHOR]

Financially distressed companies may have a better chance of survival should they have access to trusted and effective debt restructuring. However, Hong Kong lacks a statutory corporate rescue scheme despite promoting a rescue culture for struggling companies. Discussions on reforming Hong Kong's formal corporate rescue regime began in the 1990s, in which several attempts to introduce a provisional supervision scheme were made. However, due to challenges in satisfying employees' entitlements, no legislative proposal on provisional supervision was enacted. This article proposes a novel solution to this problem by reforming Hong Kong's unemployment insurance regime to better protect unemployed individuals and address the ongoing challenge of balancing the interests of employees and creditors. Additionally, the feasibility of introducing a debtor-in-possession option to Hong Kong's provisional supervision regime is examined to enhance the attractiveness and practicality of the corporate rescue rule for businesses in Hong Kong. [ABSTRACT FROM AUTHOR]

The thesis of this paper is that the role of debt and its relationship with equity in the firm, due to recent significant developments in the corporate finance markets after the global financial crisis of 2007-2008, has been transformed. The relatively new, but already very experienced private credit funds, are competing with banks in a dynamic market which is full of unforeseen and large-scale risks. The paper examines private credit funds and compares their business model to bank financing from a corporate governance perspective. The paper shows that modern debt providers (i) are interested in the firm's profit maximisation, (ii) are dynamically involved in the governance of the firm also outside financial distress, and that (iii) corporate loan financing agreements are often expected to be renegotiated (repriced). The paper argues that outside financial distress, debt and equity have become even more overlapping and intertwined than they used to be. [ABSTRACT FROM AUTHOR]

Recent empirical studies have shown that innovative firms heavily rely on debt financing. Debt overhang implies that debt hampers innovation by incumbents. A second effect of debt is that it stimulates innovation by entrants. Using a Schumpeterian growth model with endogenous R&D and financing choices, we demonstrate that this second effect always dominates, so that debt fosters innovation and growth at the aggregate level. Our analysis suggests that the relation between debt and investment is more complex than previously acknowledged and highlights potential limitations of empirical work that solely focuses on incumbents when measuring the effects of debt on investment. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

Using the data of listed companies and the DID method, this paper reveals three ways in which green credit policy (GCP) affects corporate debt financing. By controlling credit input, GCP can effectively restrain corporate debt financing in the "two-high" industries. However, the policy also leads to the environmental performance effect and bank credit discrimination effect, as it strengthens the impact of environmental performance on corporate debt financing and weakens banks' credit discrimination. Under the combined effect of the three ways, GCP has restrained the borrowing growth of state-owned enterprises, but has no significant impact on private firms. [ABSTRACT FROM AUTHOR]

Public sector corruption affects economic and financial outcomes, such as GDP growth, foreign direct investment, and government funding costs. Less is known about the spillovers from perceptions of public sector corruption on the private sector corporate bond market. In this paper, we assess the role of public sector corruption perception on corporate bond market variables in Europe using data of both country-level corporate bond indexes and firm-level corporate bond market issuances. At the aggregate country level, we find some evidence that country indices of corporate bonds' yields and coupons are higher in countries with more corruption. While we do not find effects of corruption on coupon rates at the individual firm level, we show that higher government corruption perception increases their yield to maturity and reduces the amounts raised by corporations through their bond issuances. [ABSTRACT FROM AUTHOR]