The Impact of Corporate Reputation on Cost of Debt: A Panel Data Analysis of Indian Listed Firms

Amanpreet Kaur (), Mahesh Joshi, Gagandeep Singh and Sharad Sharma
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Amanpreet Kaur: Department of Finance, Australian Institute of Business, Adelaide 5000, Australia
Mahesh Joshi: Department of Financial Planning and Tax, RMIT University, Melbourne 3000, Australia
Gagandeep Singh: Progressive Careers, Amritsar 143001, India
Sharad Sharma: Department of Financial Planning and Tax, RMIT University, Melbourne 3000, Australia

JRFM, 2024, vol. 17, issue 8, 1-14

Abstract: The study analyses the impact of financial reputation on the cost of debt financing for Indian companies. In doing so, panel regression analysis is performed using firm-specific data on 395 Indian listed firms covering 2002–2017. The paper uses market capitalization as a benchmark of financial reputation. For robustness check, excess of market value over book value is also used as a proxy of financial reputation. The study found that the reputation of a firm in financial markets plays a vital role in determining the cost of financing. The results provide evidence supporting a significant negative relationship between financial reputation and the cost of debt. The findings provide motivation for corporate managers to invest in reputation-building activities to reduce the cost of borrowing. The relevance of reputation in lowering the cost of debt capital has garnered limited attention, especially in emerging economies like India. This study is a preliminary attempt to link two strands of research in the Indian context: financial reputation and the cost of debt.

Keywords: financial reputation; cost of debt; Indian companies; market capitalization; panel regression; proxy of reputation; capital market (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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