Does good governance matter to debtholders? Evidence from the credit ratings of Japanese firms

Hiroyuki Aman and Pascal Nguyen

Research in International Business and Finance, 2013, vol. 29, issue C, 14-34

Abstract: Consistent with existing evidence based on US firms, we show that good governance is associated with higher credit ratings. The most significant variables are institutional ownership and disclosure quality. This finding suggests that active monitoring (by large shareholders) and lower information asymmetry (through better disclosures) mitigate agency conflicts and reduce the risk to debtholders. Credit ratings are also found to increase with board size, consistent with a moderation effect in large decision-making groups. As a rule, firms are expected to benefit from better governance by being able to access funding at a lower cost and in larger amounts.

Keywords: Credit rating; Cost of debt; Funding; Corporate governance; Monitoring; Disclosure (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:29:y:2013:i:c:p:14-34

DOI: 10.1016/j.ribaf.2013.02.002

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