The Effect of Corporate Debt on Default Risk

다국어 초록 (Multilingual Abstract)

The purpose of this study is to examine if there is any systematic relationship between the default risk and financial performance. From analytical results, this study develops the hypothesis by comparing the financial performance between pre-change and post-change period, using a sample of 173 Korean firms that experienced changes in their capital structures through the issue of debt during 2001-2010 period. The empirical results indicate that the financial performance has decreased for the issue of new debt from pre-change to post-change period, but the issue of debt is positively related to the cost of capital. These results hold up even after controlling for the differences in the financial leverage and size between pre-change and post-change period. Overall, the findings provide directly support to the hypothesis that the issue of debt is a negative function of the firm's financial performance as measured by the firm’s profitability( ROA) and WACC.

참고문헌 (Reference)

1 손인성, "부채수용력을 이용한 자본조달순서이론의 검정" 한국국제회계학회 (48) : 153-180, 2013

2 김요환, "기업지배구조와 감사품질, 경영성과의 관련성에 대한 실증연구" 한국국제회계학회 37 (37): 95-120, 2011

3 Dhaliwal, D, "The effect of the firm's capital structure on the relationship between changes and stock returns" University of Arizona 1989

4 Naqvi, H., "The Valuation of Corporate Debt with Default Risk" SSRN 2008

5 Dhaliwal, D, "The Effect of the Default Risk of Debt on the Earnings Response Coefficient" 412-419, 1994

6 Core, J., "The Effect of Accounting-based Debt Covenants on Equity Valuation" 1-34, 1999

7 Campbell, J., "The Econometrics of Financial Markets" Princeton University Press 1997

8 K. Lee, "The Association Between Unexpected Earnings and Abnormal Security Returns in the Presence of Financial Leverage" (Fall) : 20-41, 1991

9 Billings. B., "Revisiting the relation between the Default Risk of Debt and the Earning Response Coefficient" 509-522, 1999

10 Smith, C. W., "On financial Contracting: An analysis of Bond Covenants" 7 : 117-161, 1979

11 Shapiro, A., "Modern Corporate Finance" Macmillan 1990

12 Chava, S., "Is Default-Risk Negatively Related to Stock Returns?" SSRN 2009

13 Vassalou, M, "Default-risk in Equity Returns" (59) : 831-868, 2014

14 Easton. P., "Cross-sectional Variation in the Stock Market Response to Accounting Earnings Announcements" 117-141, 1989

15 Klein, A, "Causes and Consequences of Variations in Audit Committee Composition" SSRN 2000

16 Anderson, R., "Board Characteristics, Accounting Report Integrity,and the Cost of Debt" SSRN 2004

17 Collins, D. W., "An Analysis of International and Cross-Sectional Determinants of Earnings Response Coefficients" 143-181, 1989