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Business group affiliation, ownership structure, and the cost of debt

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Business group affiliation, ownership structure, and the cost of debt. / Byun, Hae-Young; Choi, Sunhwa; Hwang, Lee-Seok et al.
In: Journal of Corporate Finance, Vol. 23, 12.2013, p. 311-331.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Byun, H-Y, Choi, S, Hwang, L-S & Kim, R 2013, 'Business group affiliation, ownership structure, and the cost of debt', Journal of Corporate Finance, vol. 23, pp. 311-331. https://doi.org/10.1016/j.jcorpfin.2013.09.003

APA

Byun, H.-Y., Choi, S., Hwang, L.-S., & Kim, R. (2013). Business group affiliation, ownership structure, and the cost of debt. Journal of Corporate Finance, 23, 311-331. https://doi.org/10.1016/j.jcorpfin.2013.09.003

Vancouver

Byun HY, Choi S, Hwang LS, Kim R. Business group affiliation, ownership structure, and the cost of debt. Journal of Corporate Finance. 2013 Dec;23:311-331. doi: 10.1016/j.jcorpfin.2013.09.003

Author

Byun, Hae-Young ; Choi, Sunhwa ; Hwang, Lee-Seok et al. / Business group affiliation, ownership structure, and the cost of debt. In: Journal of Corporate Finance. 2013 ; Vol. 23. pp. 311-331.

Bibtex

@article{2409d691558d45d9889ba6e14eb165e9,
title = "Business group affiliation, ownership structure, and the cost of debt",
abstract = "This paper examines the relation between business group affiliation and the cost of debt capital. The co-insurance effect associated with business groups can reduce the cost of debt, while expropriation by controlling shareholders can raise the cost of debt. We find that firms affiliated with major Korean business groups (i.e., chaebols) enjoy a substantially lower cost of public debt than do independent firms, consistent with the co-insurance argument. We also examine several factors that influence the relation between group affiliation and the cost of debt, including a firm's uncertainty about the future payoffs of debtholders, pledgeable income, group-level resources, and position in the group structure. The results are all consistent with the co-insurance explanation. Our study highlights that the role of business groups in the debt market is distinct from the role of ownership structure.",
keywords = "Business groups, Ownership, Cost of debt capital, Co-insurance",
author = "Hae-Young Byun and Sunhwa Choi and Lee-Seok Hwang and Robert Kim",
year = "2013",
month = dec,
doi = "10.1016/j.jcorpfin.2013.09.003",
language = "English",
volume = "23",
pages = "311--331",
journal = "Journal of Corporate Finance",
issn = "0929-1199",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Business group affiliation, ownership structure, and the cost of debt

AU - Byun, Hae-Young

AU - Choi, Sunhwa

AU - Hwang, Lee-Seok

AU - Kim, Robert

PY - 2013/12

Y1 - 2013/12

N2 - This paper examines the relation between business group affiliation and the cost of debt capital. The co-insurance effect associated with business groups can reduce the cost of debt, while expropriation by controlling shareholders can raise the cost of debt. We find that firms affiliated with major Korean business groups (i.e., chaebols) enjoy a substantially lower cost of public debt than do independent firms, consistent with the co-insurance argument. We also examine several factors that influence the relation between group affiliation and the cost of debt, including a firm's uncertainty about the future payoffs of debtholders, pledgeable income, group-level resources, and position in the group structure. The results are all consistent with the co-insurance explanation. Our study highlights that the role of business groups in the debt market is distinct from the role of ownership structure.

AB - This paper examines the relation between business group affiliation and the cost of debt capital. The co-insurance effect associated with business groups can reduce the cost of debt, while expropriation by controlling shareholders can raise the cost of debt. We find that firms affiliated with major Korean business groups (i.e., chaebols) enjoy a substantially lower cost of public debt than do independent firms, consistent with the co-insurance argument. We also examine several factors that influence the relation between group affiliation and the cost of debt, including a firm's uncertainty about the future payoffs of debtholders, pledgeable income, group-level resources, and position in the group structure. The results are all consistent with the co-insurance explanation. Our study highlights that the role of business groups in the debt market is distinct from the role of ownership structure.

KW - Business groups

KW - Ownership

KW - Cost of debt capital

KW - Co-insurance

U2 - 10.1016/j.jcorpfin.2013.09.003

DO - 10.1016/j.jcorpfin.2013.09.003

M3 - Journal article

VL - 23

SP - 311

EP - 331

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

SN - 0929-1199

ER -