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A quantile regression analysis on corporate governance and the cost of bank loans: a research note

Author

Listed:
  • Wuchun Chi
  • Huichi Huang
  • Hong Xie

Abstract

Purpose - – This paper aims to investigate whether there is heterogeneity in the relationship between the bank loan interest rate and its determinants using the quantile regression method and to reconcile some conflicting findings in prior literature. Design/methodology/approach - – First, the effects of 18 determinants were examined on the bank loan interest rate using the ordinary least squares method (OLS). Second, it was investigated whether the relationship between the loan rate and its determinants is heterogeneous across quantiles of loan rates using the quantile regression method. Findings - – Considerable heterogeneity was found in the relationship between the loan rate and its determinants. Specifically, a determinant that is beneficial for the bank loan rate, on average, as revealed by the OLS method may become unimportant or even detrimental for firms located at extremely high or low loan rate quantiles. By revealing extreme heterogeneity in the relationship between the loan rate and some of its determinants, the authors potentially explain two conflicting findings in prior literature. Originality/value - – The conventional OLS method masks the heterogeneity in the relationship between the bank loan interest rate and its determinants. Quantile regression can be used to supplement the OLS estimates to gain a more detailed and complete picture of the relationship between the dependent variable and explanatory variables.

Suggested Citation

  • Wuchun Chi & Huichi Huang & Hong Xie, 2015. "A quantile regression analysis on corporate governance and the cost of bank loans: a research note," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 14(1), pages 2-19, February.
    • Handle: RePEc:eme:rafpps:v:14:y:2015:i:1:p:2-19
    DOI: 10.1108/RAF-12-2012-0126
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    Citations

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    Cited by:

    1. Ayoola Tajudeen John & Obokoh Lawrence Ogechukwu, 2018. "Corporate Governance and Financial Distress in the Banking Industry: Nigerian Experience," Journal of Economics and Behavioral Studies, AMH International, vol. 10(1), pages 182-193.
    2. Dana Kiselakova & Beata Sofrankova & Miroslava Soltes, 2016. "Analytical View on the Financial and Social Stability within the Euro Area: Empirical Evidence from Slovakia," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1637-1645.
    3. Marta Leite Collares, 2020. "Corporate Governance: A Major Factor in Shareholder Activism in Brazil," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 24(5), pages 414-431.

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