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The nexus between governance structure and cost of debt

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  • Abdelkader Derbali
  • Lamia Jamel
  • Mohamed Bechir Chenguel

Abstract

The purpose of this study is to investigate whether creditors consider the governance characteristics of the enterprise in deciding the cost of the debt. Starting from a sample of 486 American firms during the period from 1998 to 2017, we integrate governance in six factorial axes by using estimation by OLS regressors. We validate that audit quality as well as financial expertise are informative tools for creditors who provide information on the quality and reliability of financial information. They negatively and significantly affect the cost of the debt. Moreover, the creditors appreciate the existence of independent directors on the board of directors and reduce the cost of indebtedness required. Then, the attributes of the board of directors are poorly perceived by the creditors who will improve the interest rate. Additionally, the cost of debt improves with the concentration of managerial property and majority shareholders.

Suggested Citation

  • Abdelkader Derbali & Lamia Jamel & Mohamed Bechir Chenguel, 2022. "The nexus between governance structure and cost of debt," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 29(1), pages 119-136, January.
    • Handle: RePEc:taf:ijecbs:v:29:y:2022:i:1:p:119-136
    DOI: 10.1080/13571516.2020.1858702
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    Cited by:

    1. Massimo Arnone & Angelo Leogrande & Alberto Costantiello & Lucio Laureti, 2024. "Banking Stability in the ESG Framework Across Italian Regions," Working Papers hal-04647121, HAL.
    2. Massimo Arnone & Angelo Leogrande & Alberto Costantiello & Lucio Laureti, 2024. "Banking Stability in the ESG Framework Across Italian Regions," Working Papers hal-04647121, HAL.

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