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Cryptocurrency exposure and the cost of debt

Author

Listed:
  • Gao, Li
  • Shi, Yuan
  • Zheng, Yi

Abstract

This study examines the relationship between a company's exposure to cryptocurrency and its cost of debt. Using hand-collected data on cryptocurrency holdings for U.S. firms from 2013 to 2023, we find that firms engaged in cryptocurrency incur higher effective interest costs on their debt financing. This finding supports our hypothesis that cryptocurrency represents a high-risk investment, thereby increasing a firm's overall risk. Consequently, creditors demand higher lending costs. Given that debt financing is a crucial source of external funding, our results carry significant implications for understanding the investment behavior of public companies as they explore emerging domains like cryptocurrency.

Suggested Citation

  • Gao, Li & Shi, Yuan & Zheng, Yi, 2025. "Cryptocurrency exposure and the cost of debt," Finance Research Letters, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324016970
    DOI: 10.1016/j.frl.2024.106668
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