Returnee directors and cost of debt

Muhammad Khan, Vincent Tawiah, Muhammad Usman, Fangjun Wang and Ernest Gyapong

Journal of Business Research, 2023, vol. 168, issue C

Abstract: This study examines the relationship between returnee directors and cost of debt. We use robust econometric modelling on large unique sample data of 15,832 firm-year observations from 2007 to 2018. We find a negative and significant association between returnee directors and the cost of debt, suggesting that these directors give firms access to cheaper debt capital. The negative relationship is more pronounced in private-owned firms and firms with more than one returnee director. In further analyses, we demonstrate that returnee directors' favourable influence on the cost of debt is through improvement in internal monitoring mechanisms evident in quality financial reporting. Our findings provide evidence of how returnee directors send positive signals to the debt market through effective monitoring and transmission of superior corporate governance practices to emerging markets.

Keywords: Board composition; Corporate governance; Cost of debt; Debt capital: Returnee directors (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:168:y:2023:i:c:s0148296323004770

DOI: 10.1016/j.jbusres.2023.114118

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