Political rights and the cost of debt

• 成果类型: Article
• 署名作者: Qi, Yaxuan; Roth, Lukas; Wald, John K.
• 署名单位: University of Texas System; University of Texas at San Antonio; Concordia University - Canada; University of Alberta
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2009.10.004
• 发表日期: 2010
• 页码: 202-226
• 关键词: Political institutions; Creditor rights; Cost of debt; Freedom of the press; Cross-listing

摘要

We examine the impact of country-level political rights on the cost of debt for corporate bonds issued by firms incorporated in 39 countries. Similar to, but separate from, the relation for creditor rights, greater political rights are associated with lower yield spreads. A one standard deviation increase in political rights is associated with an 18.6% decline in bond spreads. We find evidence that political and legal institutions are substitutes; marginal improvements in political rights produce greater reductions in the cost of debt for firms from countries with weaker creditor rights. We examine potential factors through which political rights may affect the cost of debt and find that greater freedom of the press provides an important channel for reducing bond risks. Moreover, debt of firms with cross-listed equity trades at a premium in U.S. markets, but this relation appears to be more consistent with improved visibility than with bonding effects. (C) 2009 Elsevier B.V. All rights reserved.