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Board Ties and the Cost of Corporate Debt
Author(s) -
Chuluun Tuugi,
Prevost Andrew,
Puthenpurackal John
Publication year - 2014
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12047
Subject(s) - social connectedness , yield (engineering) , business , reputation , bond , debt , cost of capital , information asymmetry , monetary economics , accounting , financial system , finance , economics , incentive , psychology , social science , materials science , sociology , microeconomics , metallurgy , psychotherapist
We examine the impact of firms’ board ties on bond yield spreads. Prior literature associates board connectedness with improved access to resources due to visibility and reputation arising from greater board capital. Consistent with the board capital hypothesis, we find that better connected firms are associated with greater media coverage and more ties to financial firms. Additionally, greater connectedness is linked with statistically and economically significant lower bond yield spreads, especially for firms with high information asymmetry. Our main result appears robust and includes significant negative (positive) changes in yield spreads to announcements of additions (departures) of highly connected directors.