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Article: Ownership structure and the cost of corporate borrowing

TitleOwnership structure and the cost of corporate borrowing
Authors
KeywordsOwnership structure
Excess control rights
Control-ownership wedge
Cost of debt
Bank loans
Issue Date2011
PublisherElsevier. The Journal's web site is located at http://www.sciencedirect.com/science/journal/0304405X
Citation
Journal of Financial Economics, 2011, v. 100 n. 1, p. 1-23 How to Cite?
AbstractThis article identifies an important channel through which excess control rights affect firm value. Using a new, hand-collected data set on corporate ownership and control of 3,468 firms in 22 countries during the 1996–2008 period, we find that the cost of debt financing is significantly higher for companies with a wider divergence between the largest ultimate owner’s control rights and cash-flow rights and investigate factors that affect this relation. Our results suggest that potential tunneling and other moral hazard activities by large shareholders are facilitated by their excess control rights. These activities increase the monitoring costs and the credit risk faced by banks and, in turn, raise the cost of debt for the borrower.
Persistent Identifierhttp://hdl.handle.net/10722/192335
ISSN
2015 Impact Factor: 3.541
2015 SCImago Journal Rankings: 9.920
SSRN
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorLin, Cen_US
dc.contributor.authorMa, Yen_US
dc.contributor.authorMalatesta, Pen_US
dc.contributor.authorXuan, Yen_US
dc.date.accessioned2013-10-24T01:50:00Z-
dc.date.available2013-10-24T01:50:00Z-
dc.date.issued2011en_US
dc.identifier.citationJournal of Financial Economics, 2011, v. 100 n. 1, p. 1-23en_US
dc.identifier.issn0304-405Xen_US
dc.identifier.urihttp://hdl.handle.net/10722/192335-
dc.description.abstractThis article identifies an important channel through which excess control rights affect firm value. Using a new, hand-collected data set on corporate ownership and control of 3,468 firms in 22 countries during the 1996–2008 period, we find that the cost of debt financing is significantly higher for companies with a wider divergence between the largest ultimate owner’s control rights and cash-flow rights and investigate factors that affect this relation. Our results suggest that potential tunneling and other moral hazard activities by large shareholders are facilitated by their excess control rights. These activities increase the monitoring costs and the credit risk faced by banks and, in turn, raise the cost of debt for the borrower.-
dc.languageengen_US
dc.publisherElsevier. The Journal's web site is located at http://www.sciencedirect.com/science/journal/0304405X-
dc.relation.ispartofJournal of Financial Economicsen_US
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.rightsNOTICE: this is the author’s version of a work that was accepted for publication in Journal of Financial Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in PUBLICATION, [VOL 100, ISSUE 1, (2011)] DOI 10.1016/j.jfineco.2010.10.012-
dc.subjectOwnership structure-
dc.subjectExcess control rights-
dc.subjectControl-ownership wedge-
dc.subjectCost of debt-
dc.subjectBank loans-
dc.titleOwnership structure and the cost of corporate borrowingen_US
dc.typeArticleen_US
dc.description.naturepostprint-
dc.identifier.doi10.1016/j.jfineco.2010.10.012en_US
dc.identifier.scopuseid_2-s2.0-79751538341en_US
dc.identifier.hkuros242743-
dc.identifier.volume100en_US
dc.identifier.issue1en_US
dc.identifier.spage1en_US
dc.identifier.epage23en_US
dc.identifier.isiWOS:000287550100001-
dc.identifier.ssrn1522726-

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