LISTING STATUS, FAMILY FIRM AND THE COST OF BANK LOAN FINANCING

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Wan-Ying Lin

https://doi.org/10.22495/cocv9i2art4

Abstract

This research examines the impact of firm’s listing status on the relationship between corporate governance and cost of bank loans. The analysis yields four major findings after controlling for firm characteristics and prime interest rate. First, the financing cost of debt is higher for private firms. This result confirms that information risk is higher for private firms. Second, family firms enjoy lower cost of debt. The result found is consistent with the literature that family firms are related to a lower cost of debt financing. Third, that family firms having lower cost of debt is only found in listed firms. This evidence supports the prediction based on the lack of market perspective which suggests that the family effect requires a capital market to make it substantiate. Finally, strong corporate governance helps reduce financing cost of debt. However, these governance effects are not affected by the listing status. In other words, commercial lenders in this study price indifferently for good governance mechanisms regardless of public or private firms.

Keywords: Cost of Debt, Listing Status, Corporate Governance, Family Firms

How to cite this paper: Lin, W. Y. (2012). Listing status, family firm and the cost of bank loan financing. Corporate Ownership & Control, 9(2), 56-66. https://doi.org/10.22495/cocv9i2art4