• Journal of the Korea Academia-Industrial cooperation Society
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• v.14 no.1
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• pp.143-147
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• 2013

This paper examines the impact of corporate governance structure on the cost of debt. Total sample is divided into the small sample, the medium sample and the large sample of equity concentration, based on the equity ownership of large shareholders. Our regression results show that foreign investors are not associated with the cost of debt in the small and medium samples of equity ownership, whereas foreign investors are significantly associated with the reduction in the cost of debt in the large sample of equity concentration. Academic implications of our findings are that as the ownership of dominating shareholders rises, they seek their private interests of perks causing an increase in agency costs and a decrease in firm's economic value, thus expanding borrowing costs. Practical business implications are that foreign investors may alleviate agency problem of dominating large shareholders in the firm through monitoring activities, thus enhancing the efficiency of business decision-makings.

• The Korean Journal of Financial Management
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• v.26 no.3
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• pp.1-29
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• 2009

Since convertible debt has both characteristics of stocks and bonds, its issuance can be related to both interests of stockholders and bondholders. Nevertheless, the existing studies focused mainly on the wealth effect on stockholders. In this paper we revisit the hypotheses on the issue of convertible debt especially from the viewpoint of a firm's growth, by making an additional investigation into bondholders' wealth effects. We find that stockholders' wealth increases with bondholders' wealth in the firm whose book-to-market ratio is low and thus is considered a growth firm. This finding seems consistent with the hypothesis in which the issue of convertible debt mitigates the agency cost of debt in the high-growth firm.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.9
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• pp.51-61
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• 2020

This research investigates the consequences of the increase in corporate use of short-term debt in China over the past decades. Using a sample of Chinese firms from 2007 to 2018, we empirically explore the effect of corporate use of short-term debt for long-term investment (SFLI) on audit pricing. We first examine the relationship between SFLI and audit pricing for different groups of firms. Then, we investigate the role of the increase in short-term debt in alleviating principal-agent conflicts and reducing agency costs. We have four primary empirical findings. First, auditors tend to charge SFLI clients higher fees. Second, the negative relationship between SFLI and audit fee is found in private firms, firms audited by Chinese domestic auditors, and firms with higher information asymmetry. Third, the time auditors spent on SFLI clients is significantly more than that spent on non-SFLI clients, suggesting that the decrease in audit fee is not due to the decrease in cost. Fourth, SFLI significantly reduces the agency costs of the firm, which auditors regard as a low risk signal and grant an audit fee discount. Our findings suggest that the decrease in debt maturity, not only influences managerial behaviors, but also influences auditors' risk assessment and pricing decisions.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.16 no.9
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• pp.5829-5835
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• 2015

This paper investigates the impact of corporate governance structure on the firm's debt costs under different governance environments. We find that after the 2008 banking crisis, family firms with controlling shareholders benefit from lower debt cost through the strong control rights of dominating large shareholders, compared with the firms with diversified minority-shareholders. Foreign investors are related statistically to the higher cost of debt. Before the 2008 banking crisis, cash flows and growth potentials are positively associated with the firm's cost of debt.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.5
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• pp.551-559
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• 2021

The maturity structure of corporate debt is one of the significant financing choices that a firm must make simultaneously while deciding how to finance its operational and investment decisions. Even though the capital structure is one of the scrutinized topics of interest in the corporate finance literature, scarce studies have investigated corporate debt maturity, even less so in the context of emerging markets. The choice of a suitable debt maturity structure is exceptionally relevant for firms. It can enable them to avoid mismatch by aligning assets in line with liabilities, addressing agency-related problems, sidestep the ill effects of cost of capital, and signaling the firms' earning quality and value. The study investigates the firm-specific and macroeconomic determinants significant for the debt maturity structure of Vietnamese corporate firms. A sample of 722 non-financial firms listed on the Ho Chi Minh and Hanoi Stock Exchange in Vietnam from 2007 to 2018 was taken to test the hypothesis. The study's methods fixed effects panel data analysis provides empirical evidence that firm size, firms' quality, liquidity, leverage, asset maturity, tax impact, and macro variables are significantly related to the debt maturity structure.

• The Korean Journal of Financial Management
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• v.22 no.1
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• pp.1-36
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• 2005

In this study, we analyzed determinant factors of leverage ratio and debt maturity for Korean firms in the simultaneous equation system using 2SLS (two stage least square) method under assumption that two variables are jointly determined in the capital structure decision. As a result of the analysis, we found that leverage ratio and debt maturity are positively related. Also, as for determinant factors of debt maturity, agency cost hypothesis, asset maturity matching hypothesis, signalling and liquidity risk hypothesis are all generally supported, and further leverage ratio are significantly positively related with firm size, but negatively related with default risk. However, when we divided samples into groups according to bank debt level and Chaebul affiliation, with contrast to existing study which worked on similar issues with OLS, we found no evidence supporting the argument that the information asymmetry problem is less severe in firms with more bank debt, whereas information asymmetry and financial constraint problems are more severe in non-Chaebul affiliated firms.

• The Journal of Asian Finance, Economics and Business
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• v.5 no.4
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• pp.9-20
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• 2018

Global rating agencies, such as Moody's and S&P, have assigned credit ratings to corporate bonds issued by Japanese firms since 1980s. Local Japanese rating agencies, such as R&I and JCR, have more market share than the global raters. We examine the yield spreads of 1,050 yen-denominated corporate bonds issued by financial firms in Japan from 1998 to 2014 and find no evidence that bonds rated by at least one global agency are associated with a significant reduction in the cost of debt as compared to those rated by only local rating agencies. Unlike non-financial firms, the reputation effect of global rating agencies does not exist for Japanese financial firms. We also observe that firms with less information asymmetry are more likely to acquire ratings from Moody's or S&P. Additionally, the firm's financial profile does not affect its choice to seek out ratings from global raters. Our findings are contradictory to those by Han, Pagano, and Shin (2012), who employ bonds issued by non-financial firms in Japan. Our conjecture is that the asymmetric nature of financial firms makes investors less likely to depend on a credit risk assessment by rating agencies in determining the yields of new bonds.

• Journal of the Korea Convergence Society
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• v.6 no.1
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• pp.71-76
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• 2015

Using a sample of publicly-traded Chinese firms, this study examines a relationship between managerial ownership and corporate debt maturity decisions. China has transformed dramatically into a market capitalist economy over the past decades. However, so far, little attention has been paid to the role of professional managers. In this situation, this study explores the effect of stock grants to managers as incentive system by providing evidence that managerial ownership affects corporate debt maturity decisions. The findings are as follows: First, I find that like US firms, managerial ownership is negatively related to the proportion of long-term debt. Second, I divide the entire sample into two subsamples of state-owned and privately owned firms. For the privately owned firms, I find that there is a negative relationship between managerial ownership and the proportion of long-term debt. In contrast, for the state-owned firms, the relationship is positive and insignificant.

• The Korean Journal of Financial Management
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• v.25 no.3
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• pp.155-173
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• 2008

Controlling for the impacts of main strands of debt maturity theories, we highlight the relationship between syndicated loan maturity and ownership structure of Korean borrowers. We find that as the ownership of large shareholders increases, the maturity of syndicated loans also increases. Additionally, we identify a negative relation between foreigners' ownership and loan maturity, indicating that foreign institutional investors serve valuable monitoring functions; as their equity shares increase, they fully take advantage of frequent renewals through the short maturity of syndicated loan. We also show that the predicted value of leverage is more systematically and positively related to the maturity of syndicated loan.

• International Area Studies Review
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• v.21 no.2
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• pp.143-169
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• 2017

This paper empirically examines how capital structure inertia varies across industries and there is different in industries, and whether this fact is explained by product market competition using non-financial firms listed in KOSP market over periods of 1981 to 2015. In empirical test, I find that firms with more competition environment tend to have inertia behavior in making decision of capital structure. This implies that it is explained by debt discipline effect and it is substitution for product market competitions. Also I find that manager tends to take action actively making decision of capital structure when product market competition is low. Also I show that they use debt to constraint the free cash flow. As a result, I conclude that Korean non-financial firms do not have more strong inertia behavior in capital structure rather than U.S. firms. Second, using OLS estimation, inertia effect disappears while there is strong inertia effect in relationship between inertia and product market competition. This result suggests that transaction cost is not key factor in explaining inertia behavior of capital structure.