Institutional ownership stability and the cost of debt
This study documents that the stability of institutional ownership plays an important role in determining the cost of debt. After controlling for other determinants of the cost of debt, and correcting for the endogeneity of institutional ownership stability, three major results are uncovered. First, there is a robust negative relationship between the cost of debt and institutional ownership stability. Second, institutional ownership stability plays a bigger role in determining the cost of debt, than the institutional ownership level commonly used in the literature. Third, institutional ownership stability affects the cost of debt to a greater extent for firms that are subject to more severe information asymmetry and greater agency costs of debt.
Year of publication: |
2010
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Authors: | Elyasiani, Elyas ; Jia, Jingyi ; Mao, Connie X. |
Published in: |
Journal of Financial Markets. - Elsevier, ISSN 1386-4181. - Vol. 13.2010, 4, p. 475-500
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Publisher: |
Elsevier |
Keywords: | Institutional ownership stability Corporate governance Agency problems Cost of debt |
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