International evidence of nexus between positive operating cash activities and cost of debt

Harit Satt () and Dr Saadani Ghali
Additional contact information
Harit Satt: School of Business Administration, Al Akhawayn University, Ifrane, Morocco
Dr Saadani Ghali: Université Mohammed V - Agdal

Journal of Economic and Financial Studies (JEFS), 2015, vol. 3, issue 4, 41-49

Abstract: This paper identifies the affiliation between the ending cash balance of the operating section in the cash flow statement and the bonds ratings. Our sample includes 600 companies from 26 countries. The study was conducted over a period of 18 years. An Ordered Probit regression analysis had been applied to identify how the positive cash balance of the operating section in the cash flow statement shapes the probability of escalating the bonds ratings. We find burly proof that the positive operating cash balance considerably affects the bonds ratings. In other words, when a company is able to generate enough cash from its main operating activities, the likelihood of having higher bonds ratings raises; this entails a low cost of debt since higher bond ratings have been proven to lessen the company’s cost for raising funds (in the form of bonds). The results add more confirmation to the creditors’ rights shields and how it affects the cost of debt.

Keywords: Credit ratings, default risk; operating cash position. (search for similar items in EconPapers)
JEL-codes: D78 G20 H11 H73 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
http://journalofeconomics.org/index.php/site/article/view/82/145 (application/pdf)

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:lrc:lareco:v:3:y:2015:i:4:p:41-49

Access Statistics for this article

More articles in Journal of Economic and Financial Studies (JEFS) from LAR Center Press
Bibliographic data for series maintained by S Marjan ( this e-mail address is bad, please contact ).