Online Reputation and Debt Capacity

Francois Derrien (), Alexandre Garel (), Arthur Petit-Romec and Jean-Philippe Weisskopf
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Alexandre Garel: Audencia Business School

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Abstract: This paper explores the effects of online customer ratings on financial policy. Using a large sample of Parisian restaurants, we find a positive and economically significant relation between customer ratings and bank debt. We use the locally exogenous variations in customer ratings resulting from the rounding of scores in regression discontinuity tests to establish causality. Customer ratings have more impact on debt when information asymmetry is higher. They affect financial policy through a reduction in cash flow risk and greater resilience to demand shocks. Restaurants with good ratings use their extra debt to invest in tangible assets.

Keywords: online reputation; customer ratings; corporate debt; corporate investment (search for similar items in EconPapers)
Date: 2024-05
Note: View the original document on HAL open archive server: https://hal.science/hal-04571847v1
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Published in Journal of Financial and Quantitative Analysis, 2024, 59 (3), ⟨10.1017/S0022109023000248⟩

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Related works:
Journal Article: Online Reputation and Debt Capacity (2024)
Working Paper: Online Reputation and Debt Capacity (2020)
Working Paper: Online Reputation and Debt Capacity (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04571847

DOI: 10.1017/S0022109023000248

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