Financial Reporting Quality, Debt Maturity, and the Cost of Debt: Evidence from China

Chen, Chao; Zhu, Siyu

doi:10.2753/ree1540-496x4905s416

Cited by 33 publications

(16 citation statements)

References 45 publications

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“…Table 6 shows that IFRS adoption has the opposite effect on large companies. This result supports hypothesis H3 and agrees with other empirical evidence (Zhang, 2008;Kosi & Florou, 2009;Ball et al, 2014;Chen & Zhu, 2013). Although large firms disclose financial information to the market, potential firm agency problems with investors make IFRS adoption an effective means to control them through the issuance of short-term debt.…”

Section: Discussionsupporting

confidence: 90%

“…This is supported by other empirical studies as well (Kosi & Florou, 2009;Ball, Xi & Shivakumar, 2014). Chen and Zhu (2013) corroborate this vision and add that IFRS are an effective means to mitigate the effects of the agency problem between firms and the bondholders. This effect may be more pronounced in countries with reduced legal protection for investors (Beneish, Miller & Yohn, 2015) or where IFRS show greater differences in relation to local accounting criteria (Chen et al, 2015).…”

Section: Effects Of Ifrs Adoption On Debt Maturitysupporting

confidence: 76%

“…First, the Commission for Financial Markets (CFM) requires large companies to disclose their financial statements on a quarterly basis. In line with Chen and Zhu (2013), this would make the asymmetry of information in large firms less than in SMEs. In addition, its diluted ownership structures and the presence of controlling shareholder would generate higher agency costs.…”

Section: Effects Of Ifrs Adoption On Debt Maturitymentioning

confidence: 87%

“…Currently, the literature has not reached a clear conclusion. The positive effect on long-term debt generated by lower information asymmetry (Sengupta, 1998;Florou & Kosi, 2008;Kim, Tsui & Yi, 2011;Simmer de Lima, Sampaio & Gotti, 2018) is opposed to the negative effect with which IFRS mitigates agency conflicts through short-term debt (Zhang, 2008;Kosi & Florou, 2009;Chen & Zhu, 2013). In Chile, this matter has not yet been addressed.…”

Section: Introductionmentioning

confidence: 99%

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Effects of foreign ownership and International Financial Reporting Standards on debt maturity in Chilean firms

et al. 2019

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The objective of this article is to determine the effects of foreign ownership and International Financial Reporting Standards (IFRS) on debt maturity in Chilean companies. The study uses a fractional response model (FRM) on 20,586 companies. The results show foreign ownership has a negative and non-linear effect. Foreign ownership in Chilean firms is a substitute control means in relation to long-term debt. IFRS reduces maturity in large companies and extends them in small and medium enterprises (SMEs). These results suggest it is more important for large firms to control agency conflicts, while it is more important for SMEs to reduce information asymmetry. Efectos de la propiedad extranjera y Normas Internacionales de Información Financiera sobre la madurez de la deuda en firmas chilenasResumen El objetivo de este artículo es determinar los efectos de la propiedad extranjera y de las Normas Internacionales de Información Financiera (NIIF) sobre la madurez de la deuda en las empresas chilenas. En el estudio se utiliza un modelo de respuesta fraccional (MRF) sobre 20.586 empresas. Los resultados demuestran que la propiedad extranjera tiene un efecto negativo y no lineal, transformándose en un medio de control sustituto en relación con la deuda de largo plazo. Las NIIF reducen la madurez en empresas grandes y la extiende en las pequeñas y medianas empresas (Pymes). Estos resultados sugieren que para las firmas grandes es más importante controlar conflictos de agencia, mientras que para las Pymes es más importante reducir las asimetrías de información.Palabras clave: madurez, propiedad extranjera, calidad crediticia. Efeitos da propriedade estrangeira e das Normas Internacionais de Relato Financeiro no vencimento da dívida em empresas chilenasResumo O objetivo deste artigo é determinar os efeitos da propriedade estrangeira e das Normas Internacionais de Relato Financeiro (IFRS) no vencimento da dívida em empresas chilenas. O estudo utiliza um Modelo de Resposta Fracionária (MRF) em 20.586 empresas. Os resultados mostram que a propriedade estrangeira tem efeito negativo e não linear, tornando-se um meio de controle substituto em relação à dívida de longo prazo. O IFRS reduz a maturidade em grandes empresas e as estende em Pequenas e Médias Empresas (PMEs). Esses resultados sugerem que, para grandes empresas, é mais importante controlar conflitos entre agências, enquanto para as PMEs é mais importante reduzir as assimetrias de informações. Palavras-chave: maturidade, propriedade estrangeira, qualidade de crédito.

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Section: Discussionsupporting

confidence: 90%

Section: Effects Of Ifrs Adoption On Debt Maturitysupporting

confidence: 76%

Section: Effects Of Ifrs Adoption On Debt Maturitymentioning

confidence: 87%

Section: Introductionmentioning

confidence: 99%

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Effects of foreign ownership and International Financial Reporting Standards on debt maturity in Chilean firms

et al. 2019

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“…Thus, we predict that LEV has a positive impact on the cost of debt financing. We expect a negative coefficient on ROS as better financial performance reduces firms' business risk [66,67]. Prior literature shows that interest rates are increasing in collateral and thus the coefficient on tangible asset intensity (TANG) is positively related with debt financing costs [47,65].…”

Section: Empirical Modelmentioning

confidence: 94%

Signing Auditors’ Foreign Experience and Debt Financing Costs: Evidence for Sustainability of Chinese Listed Companies

Hou

Liao²,

Liu

et al. 2019

Sustainability

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This study investigates whether signing auditors with foreign experience influence debt financing costs. Using a sample of Chinese listed firms for the period of 2001–2016, this study hand-collects the information of signing auditors’ foreign experience and empirically examines the relationship between signing auditors’ foreign experience and debt financing costs. The empirical results show that signing auditors’ foreign experience is significantly and negatively correlated with debt financing costs, suggesting that signing auditors’ foreign experience improves audit quality, reduces information risk and thereby lowers the cost of debt financing. Further analyses show that the negative effect of signing auditors’ foreign experience on the cost of debt financing is more pronounced in audit firms without industry expertise, suggesting that audit firm industry expertise mitigates the negative relationship between signing auditors’ foreign experience and debt financing costs. These results imply that signing auditors who have foreign experience could serve a significant role in debt financing, which would strengthen firms’ sustainability.

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The effect of environmental, social, and governance disclosure and real earning management on the cost of financing

Amarna,

Garde Sánchez,

López‐Pérez

et al. 2024

Corp Soc Responsibility Env

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This study identifies if sustainable development practices measured through ESG information disclosure are related to stakeholder confidence, leading to a lower cost of debt and equity financing. We also investigate the possible moderating role of real earnings management. We apply a fixed effects panel data analysis to 1659 firm‐year observations of 177 European companies from 2010 to 2019. The results show that investors value ESG disclosure negatively and increase the cost of equity, whereas lenders value it positively and reduce the cost of debt. In addition, when the moderating effect of real earnings management is introduced, the effect of ESG disclosure on the cost of debt decreases, and the effect of ESG disclosure on the cost of equity is reinforced by increasing it. In the presence of real earnings management, investors and lenders seem to think companies use ESG disclosure to legitimise their practices or mislead financing providers.

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Financial Reporting Quality, Debt Maturity, and the Cost of Debt: Evidence from China

Cited by 33 publications

References 45 publications

Effects of foreign ownership and International Financial Reporting Standards on debt maturity in Chilean firms

Effects of foreign ownership and International Financial Reporting Standards on debt maturity in Chilean firms

Signing Auditors’ Foreign Experience and Debt Financing Costs: Evidence for Sustainability of Chinese Listed Companies

The effect of environmental, social, and governance disclosure and real earning management on the cost of financing

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