IDEAS home Printed from https://ideas.repec.org/a/fau/fauart/v73y2023i4p375-391.html
   My bibliography  Save this article

Corporate Structure Complexity and Cost of Debt

Author

Listed:
  • Hong-Hanh Thi Huynh

    (The University of Danang, School of Economics, Danang, Vietnam)

  • Hoang-Long Phan

    (The University of Danang, School of Economics, Danang, Vietnam)

Abstract

This paper investigates how a firm’s cost of debt is related to the complexity of its corporate structure. Our hand-collected data sample covers 3271 loan-year observations of 815 publicly listed US firms for the period between 2012 and 2017. The results show a positive and significant relationship between corporate structure complexity and cost of debt. More complex firms are also found to have lower debt ratings and more financial covenants enclosed in their loan contracts. These findings suggest that greater corporate structure complexity is associated with increased credit risk. Instrumental variable analysis and a number of additional tests further confirm our results. Our results also hold for corporate bonds.

Suggested Citation

  • Hong-Hanh Thi Huynh & Hoang-Long Phan, 2023. "Corporate Structure Complexity and Cost of Debt," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 73(4), pages 375-391, December.
    • Handle: RePEc:fau:fauart:v:73:y:2023:i:4:p:375-391
    as

    Download full text from publisher

    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1525
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    corporate structure; cost of debt; complexity;
    All these keywords.

    JEL classification:

    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fau:fauart:v:73:y:2023:i:4:p:375-391. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Natalie Svarcova (email available below). General contact details of provider: https://edirc.repec.org/data/icunicz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.