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Online Reputation and Debt Capacity

Author

Listed:
  • F. François Derrien
  • A. Garel

    (Audencia Business School)

  • A. Petit-Romec
  • J.-P. Jean-Philippe Weisskopf

Abstract

This paper explores the effects of online customer ratings on financial policy. Using a large sample of Parisian restaurants, we find a positive and economically significant relation between customer ratings and bank debt. We use the locally exogenous variations in customer ratings resulting from the rounding of scores in regression discontinuity tests to establish causality. Customer ratings have more impact on debt when information asymmetry is higher. They affect financial policy through a reduction in cash flow risk and greater resilience to demand shocks. Restaurants with good ratings use their extra debt to invest in tangible assets.

Suggested Citation

  • F. François Derrien & A. Garel & A. Petit-Romec & J.-P. Jean-Philippe Weisskopf, 2024. "Online Reputation and Debt Capacity," Post-Print hal-04571847, HAL.
    • Handle: RePEc:hal:journl:hal-04571847
    DOI: 10.1017/S0022109023000248
    Note: View the original document on HAL open archive server: https://hal.science/hal-04571847v1
    as

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