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Does good governance matter to debtholders ? Evidence from the credit ratings of Japanese firms

Author

Listed:
  • Hiroyuki Aman

    (School of Business Administration [Kwansei Gakuin] - Kwansei Gakuin University)

  • Pascal Nguyen

    (Axe 2 (2011-2016) : « Marchés, Cultures de consommation, Autonomie et Migrations » (MSHS Poitiers) - MSHS de Poitiers [Maison des sciences de l'homme et de la société de Poitiers] - Maison des sciences humaines et sociales de Poitiers [USR 3565] - UP - Université de Poitiers = University of Poitiers - CNRS - Centre National de la Recherche Scientifique, UTS - University of Technology Sydney)

Abstract

Consistent with existing evidence based on US firms, we show that good governance is associated with higher credit ratings. The most significant variables are institutional ownership and disclosure quality. This finding suggests that active monitoring (by large shareholders) and lower information asymmetry (through better disclosures) mitigate agency conflicts and reduce the risk to debtholders. Credit ratings are also found to increase with board size, consistent with a moderation effect in large decision-making groups. As a rule, firms are expected to benefit from better governance by being able to access funding at a lower cost and in larger amounts.

Suggested Citation

  • Hiroyuki Aman & Pascal Nguyen, 2013. "Does good governance matter to debtholders ? Evidence from the credit ratings of Japanese firms," Post-Print halshs-01368904, HAL.
    • Handle: RePEc:hal:journl:halshs-01368904
    DOI: 10.1016/j.ribaf.2013.02.002
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