Rollover risk and cost of bank debt: The role of family-control ownership

Wan-Chien Chiu and Chih-Wei Wang

Pacific-Basin Finance Journal, 2019, vol. 53, issue C, 362-378

Abstract: This study examines the effect of family-control ownership on the relationship between the cost of bank debts and the risk of rolling over maturing debts into new debts. We examine Taiwanese firms during 1996–2015 and find that, among all firms exposed to rollover risk, firms with family-control ownership pay more interest on bank loans than firms with nonfamily-control ownership. Furthermore, the loan cost increasing effect is stronger for family-control firms with informational opacity and poorer credit quality. Our evidence supports the agency theory argument that family-control ownership intensifies the shareholder–debtholder conflict associated with the rollover risk. As such, this investigation provides novel empirical insights into the firm-level interaction among family control, rollover risk, and bank debt costs.

Keywords: Family-control ownership; Bank loan; Rollover risk; Short-term debt (search for similar items in EconPapers)
JEL-codes: G00 G18 G21 G32 G33 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X18303305
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:53:y:2019:i:c:p:362-378

DOI: 10.1016/j.pacfin.2018.12.003

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().