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Does geography matter in a geographically small and culturally homogeneous country? Firm location and corporate credit risk

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  • Chen, Tsung-Kang

Abstract

This study explores whether or not the geography characteristics of a firm's headquarters location affect the firm's credit risk in a geographically small and culturally homogeneous country by employing firm location data in Taiwan from the year 2005 to 2011. Empirical results of this study show that rural firms have higher credit risk than urban firms. In addition, the firm location effect is mainly through the channels of incomplete information and financial leverage. Moreover, the study also finds that a firm's market-debt financing distance is positively associated with its credit risk while the firm's banking-debt financing distance has insignificant effect.

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  • Chen, Tsung-Kang, 2016. "Does geography matter in a geographically small and culturally homogeneous country? Firm location and corporate credit risk," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 323-348.
    • Handle: RePEc:eee:reveco:v:44:y:2016:i:c:p:323-348
    DOI: 10.1016/j.iref.2016.02.007
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    Cited by:

    1. Nguyen, Thi Bao Ngoc & Lin, Li-Feng & Su, Xuan-Qi & Yu, Jui-Hung, 2021. "Does Managerial Education Matter for Credit Risk? Evidence from Taiwan," Finance Research Letters, Elsevier, vol. 41(C).
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    3. Mohamed, Toka S. & Elgammal, Mohammed M., 2023. "Credit risk in Islamic microfinance institutions: The role of women, groups, and rural borrowers," Emerging Markets Review, Elsevier, vol. 54(C).

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    More about this item

    Keywords

    Firm location; Credit risk; Geographically small country (Taiwan); Financing distance; Structural form credit models;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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