Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/61363
Title: National culture and the cost of debt
Authors: Chui, ACW 
Kwok, CCY
Stephen, Zhou, G
Keywords: Agency cost
Bankruptcy
Cost of capital
Embeddedness
Mastery
National culture
Issue Date: 2016
Publisher: Elsevier
Source: Journal of banking and finance, 2016, v. 69, p. 1-19 How to cite?
Journal: Journal of banking and finance 
Abstract: This study investigates how Schwartz's cultural dimensions of embeddedness and mastery affect the corporate cost of debt through bankruptcy risk and sensitivity to agency activity channels. Using data from 33 countries, we find a strong and robust negative relation between embeddedness and the cost of debt. The estimated relation between mastery and the corporate cost of debt is negative and significant in most of the tests. Further analyses reveal that the development of financial intermediation and the enforcement of insider trading law moderate the relation between culture and the cost of debt. Confirming our hypotheses, we document that embeddedness is negatively related to bankruptcy risk and sensitivity to agency activity. We find that mastery is positively related to bankruptcy risk across countries as well, but this relation is weaker. We also show that mastery is positively related to sensitivity to agency activity among countries with highly leveraged firms.
URI: http://hdl.handle.net/10397/61363
ISSN: 0378-4266
EISSN: 1872-6372
DOI: 10.1016/j.jbankfin.2016.04.001
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