The impact of ICT diffusion on sovereign cost of debt

Apostolos Kotzinos, Dimitris Psychoyios and Nikolaos Vlastakis

International Journal of Banking, Accounting and Finance, 2021, vol. 12, issue 1, 16-51

Abstract: We examine the effect of a country's level of information and communication technologies (ICT) diffusion on its credit rating and cost of debt. ICT diffusion is approximated using the Networked Readiness Index, which is designed to capture a country's capacity and preparedness to participate in the digital economy. We adopt a modified random effects approach which allows us to distinguish between short and long run effects on a dataset of 65 countries for a time span of ten years. We show that ICT have a significant impact on a country's credit rating and cost of debt which is robust to the presence of other variables proposed in the literature. The effect is stronger for non-OECD countries, indicating a pathway for developing countries to improve their access to debt markets. Our conclusions are robust to the advent of the recent financial crisis.

Keywords: credit ratings; sovereign debt; information and communication technologies; ICT; e-readiness; developing countries. (search for similar items in EconPapers)
Date: 2021
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