Corporate Reputation And Debt Financing Costs

Debt financing has always played an important role in the external financing of Chinese enterprises.By the end of December 2019,RMB loans accounted for 60.31%of total social financing.From the perspective of social financing structure,debt financing occupies a large share.However,debt financing costs still constitute the most important operating burden of Chinese enterprises.According to the data calculation of A-share listed companies in THE CSMAR database from 2008 to 2018,the average annual interest rate of bank loans was 6.16%,higher than the average annual return on owners’ equity of 2.67%.Previous studies have shown that the cost of debt financing is affected by various factors,including the internal governance level and the external environment of the company.Therefore,it is of great theoretical and practical significance to discuss how to reduce enterprise debt financing costs in the current process of enterprise transformation and upgrading and promoting high-quality economic development.Since entering the tide of globalization,market competition has become increasingly fierce.After several stages of price competition,quality competition and service competition,the competition among enterprises has developed into a new stage--reputation competition stage.At the same time,the international community increasingly attaches importance to business ethics and other moral factors,making corporate reputation and reputation management further become the focus of attention of many scholars.Research shows that corporate reputation can act as an informal institutional arrangement and external governance mechanism and play a role in the contractual relationship of enterprises.Therefore,corporate reputation may also have an important impact on the cost of debt financing.Previous literature mainly study the company’s reputation for the company performance,earnings management,investment efficiency,the influence of equity capital cost,the research on the influence factor of corporate debt financing costs to focus on quality of information disclosure,internal governance and external environment characteristics,but few studies directly to the company’s reputation for debt financing costs.In view of this,based on the 2007 to 2019,the Shanghai and Shenzhen A-share listed companies in China as the research sample,using the "China top 500 most valuable brands","China’s most respected enterprise","the most admired Chinese list company" define the company’s reputation,the use of debt interest payments with the enterprise average including the ratio of liabilities to calculate the cost of debt financing,The influence of corporate reputation on corporate debt financing cost and its influencing mechanism are analyzed theoretically and empirically.The findings of this paper are as follows:firstly,a good reputation helps a company to obtain external debt financing at a lower cost,and the conclusions remain reliable after robustness test and endogeneity treatment.Secondly,the results of mechanism analysis show that a good reputation can reduce agency cost and transaction cost,improve the competitive advantage of the enterprise in the debt market,and then reduce the debt financing cost of the enterprise;Thirdly,heterogeneity analysis results show that the high degree of information asymmetry,tangible assets ratio,lower degree,full of loanable funds,lower in non-state enterprises,company’s reputation for the effects of debt financing cost more,by the reputation of the enterprises of different financing constraints of debt financing costs have a significant negative correlation relationship,However,the degree of financing constraints is not significant in the impact of reputation effect.The research of this paper theoretically reveals the effect of corporate reputation on the cost of debt financing,that is,a company with a good reputation will bear a lower cost of debt financing,enriching the research on the influencing factors of corporate reputation and debt financing cost.In practice,the research conclusions of this paper help the management of listed companies to understand the significance of corporate reputation in the right way,urge them to consciously establish and maintain a good corporate reputation,and provide new ideas for enterprises to effectively reduce the cost of debt financing.