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
Arthur Petit-Romec: UP1 UFR02 - Université Paris 1 Panthéon-Sorbonne - École d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne

Working Papers from HAL

Abstract: This paper explores the effects of online customer ratings on debt capacity. 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 variation in customer ratings resulting from the rounding of scores in regression discontinuity tests to establish causality. Customer ratings affect financial policy through a reduction in cash flow risk and higher resilience to demand shocks. Restaurants with good ratings use their extra debt capacity to invest in tangible assets. Finally, favorable online ratings relax credit constraints mostly for moderately constrained restaurants.

Keywords: online reputation; customer ratings; corporate debt; corporate investment (search for similar items in EconPapers)
Date: 2020-07-10
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Related works:
Journal Article: Online Reputation and Debt Capacity (2024)
Working Paper: Online Reputation and Debt Capacity (2024)
Working Paper: Online Reputation and Debt Capacity (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-02896691

DOI: 10.2139/ssrn.3538313

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