This study examines the association between the cost of debt capital and corporate governance practices. Utilizing a unique data set of firm-level corporate governance practices that is provided by the Korea Corporate Governance Service (KCGS), this study examines whether sound corporate governance practices reduce agency costs and thus the default risk and cost of debt capital of a firm. The f...

The credit risk evaluation of corporate bond is one of the difficult and hot research fields in the related research and plays a key role for corporate financing. Based on the fuzzy theory and analytic hierarchy process, a new credit risk evaluation model of corporate bond is presented. First an evaluation indicator system of credit risk of corporate bond is designed through analyzing the chara...

We provide a comprehensive review of firms’ financing channels (internal and external, domestic and international) around the globe, with the focus on alternative finance—financing from all the nonmarket, non-bank external sources. We argue that while traditional financing channels, including financial markets and banks, provide significant sources of funds for firms in developed countries, alt...

Using a novel dataset of accounting and market information that spans most publicly traded firms over the last century, we show that government deficit financing crowds out nonfinancial corporate debt financing and investment. Specifically, an increase in the supply of treasury debt is associated with a significant reduction in corporate leverage, debt issuances, and investment, but no signific...

This study examines the financing choices of firms operating in a weak institutional environment. We argue that in relationship-based systems, global financing and strong political connections are alternative means to create firm value. Well-connected firms might be less inclined to access global capital markets because (state-owned) domestic banks provide capital at low cost. Moreover, the exp...

Available online 18 October 2014 Extant literature suggests that bank monitoring improves corporate governance. This paper demonstrates that inefficiency in banking can also significantly reduce the equity capital markets' disciplinary power. Specifically, we show that in an environment in which the banking system is dominated by inefficient state-owned banks, controlling shareholders' tunnelin...

Prior research has documented evidence that entrenched managers tend to avoid debt. Contrary to this evidence, I find that firms with weak shareholder rights, as measured by the Gompers et al. (2003) governance index, actually use more debt finance and have higher leverage ratios. I provide an explanation by showing that entrenched managers choose conservative (safe) investment policies and the...

There is wide debate over the causes and ultimate importance of the pecking order and debt conservatism to firm financing decisions. We argue that these empirical patterns are not driven solely by firmand market level variation, but are also linked to individual managerial characteristics. We relate the reluctance of (some) managers to access external capital markets, and particularly equity ma...

We develop a model that endogenizes dynamic financing, investment, and cash retention/payout policies in order to analyze the effect of financial flexibility on firm value. We show that the value of financing flexibility depends on the costs of external financing, the level of corporate and personal tax rates which determine the effective cost of holding cash, the firm’s growth potential and it...