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The effect of corporate governance on debt financing cost of listed companies

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Abstract

In recent years, bank credit business is booming with the increasing borrowing intention of China’s listed companies, and debt financing has become the major approach among listed companies’ financing strategies. As a series of institutional arrangements about rights, responsibilities and benefits between different shareholders, corporate governance mechanism has a significant influence on the cost of debt financing. This paper employs variable coefficient panel data model to investigate the relationship of the listed company’s debt financing costs and corporate governance mechanism in terms of structural characteristics and time series characteristics. The results show that optimizing the structure of both Board of Directors and Board of Supervisors, establishing a reasonable management incentive system and reducing the concentration of ownership properly can directly contribute to a lower company’s debt financing costs. Meanwhile, property rights have an interactive influence on corporate governance from four aspects, which indirectly effect in company’s debt financing costs.

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Author information

Authors and Affiliations

  1. School of Economics and Management, Beihang University, Beijing, 100191, China

    Lin Li & Haijun Huang

  2. Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, 100190, China

    Lin Li & Shouyang Wang

  3. School of Finance, Central University of Finance and Economics, Beijing, 100081, China

    Fangyu Dong

  4. School of Economics, Central University of Finance and Economics, Beijing, 100081, China

    Yifang Liu

Authors
  1. Lin Li
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  2. Fangyu Dong
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  3. Yifang Liu
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  4. Haijun Huang
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  5. Shouyang Wang
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Corresponding author

Correspondence to Yifang Liu.

Additional information

This research is supported by the National Natural Science Foundation of China under Grant No. 71003115, Collaborative Innovation Center, and Research Innovation Team Supporting Plan of the Central University of Finance and Economics.

This paper was recommended for publication by Editor ZHANG Xun.

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Li, L., Dong, F., Liu, Y. et al. The effect of corporate governance on debt financing cost of listed companies. J Syst Sci Complex 29, 772–788 (2016). https://doi.org/10.1007/s11424-016-5192-3

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  • DOI: https://doi.org/10.1007/s11424-016-5192-3

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