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Brand capital and debt choice

Nurul Alam, Sabri Boubaker Orcid Logo, Xiaomeng Charlene Chen, Mostafa Monzur Hasan

International Review of Financial Analysis, Volume: 93

Swansea University Author: Sabri Boubaker Orcid Logo

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DOI (Published version): 10.1016/j.irfa.2024.103160

Abstract

This paper investigates the effect of brand capital on firms' choices of debt structure. Using a sample of publicly listed U.S. firms between 2001 and 2019, we find that firms with higher levels of brand capital rely less on bank debt financing. This finding is robust to the use of alternative...

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Published in: International Review of Financial Analysis
ISSN: 1057-5219 1873-8079
Published: Elsevier BV 2024
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URI: https://cronfa.swan.ac.uk/Record/cronfa67320
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last_indexed 2024-11-25T14:19:58Z
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spelling 2024-09-18T15:20:35.4317949 v2 67320 2024-08-05 Brand capital and debt choice 43999fff86cd8a29f4815fb4dfa47729 0000-0002-6416-2952 Sabri Boubaker Sabri Boubaker true false 2024-08-05 CBAE This paper investigates the effect of brand capital on firms' choices of debt structure. Using a sample of publicly listed U.S. firms between 2001 and 2019, we find that firms with higher levels of brand capital rely less on bank debt financing. This finding is robust to the use of alternative regression models and alternate measures of brand capital and bank debt financing. Employing an industry-level positive shock to brand capital as a quasi-natural experiment, we demonstrate that such a shock negatively affects firms' reliance on bank debt. Our cross-sectional analyses reveal that the effect of brand capital on bank debt is more pronounced for firms with high information asymmetry, weak corporate governance mechanisms, and poor financial conditions. We also find that brand capital-intensive firms raise funds from the public debt market and issue more (or less) unsecured (or secured) debt. Taken together, we show that brand capital has an important bearing on corporate financing decisions. Journal Article International Review of Financial Analysis 93 Elsevier BV 1057-5219 1873-8079 Brand capital, debt choice, information environment, agency problems 1 5 2024 2024-05-01 10.1016/j.irfa.2024.103160 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University We gratefully acknowledge helpful comments and suggestions from the editor and four anonymous reviewers. We also thank Mara Faccio, Viet Anh Dang, Sadok El Ghoul, Sergio H. Rocha, Sadiqul Islam, Abul Shamsuddin, Xiaoran Ni, Wael Rouatbi, Walid Saffar, Syrine Sassi, Zhongtian Li, Carl Shen, Cathy Wu, and seminar participants at the Jinling Institute of Technology, Rabat Business School, Catholic University of Lyon, Nanjing University of Finance and Economics, University of Swansea, Griffith University, EM Normandie Business School, University of Newcastle, University of Dhaka, and University of Bologna, and the participants at Accounting and Finance Association of Australia and New Zealand (AFAANZ) Conference 2022, Future Finance Conference 2022, FMA Asia Pacific Conference 2022, and 4th RCEF Conference on Economics and Finance (Rajagiri Business School, Kerala, India, 2022). Authors’ names appear in alphabetical order. The usual disclaimer applies. 2024-09-18T15:20:35.4317949 2024-08-05T16:27:49.5868522 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Nurul Alam 1 Sabri Boubaker 0000-0002-6416-2952 2 Xiaomeng Charlene Chen 3 Mostafa Monzur Hasan 4 67320__31365__3fdbc4d50f3040938f637eddbf135e76.pdf 67320.VOR.pdf 2024-09-18T15:11:18.1004224 Output 711632 application/pdf Version of Record true © 2024 The Authors. This is an open access article distributed under the terms of the Creative Commons CC-BY license. true eng http://creativecommons.org/licenses/by/4.0/
title Brand capital and debt choice
spellingShingle Brand capital and debt choice
Sabri Boubaker
title_short Brand capital and debt choice
title_full Brand capital and debt choice
title_fullStr Brand capital and debt choice
title_full_unstemmed Brand capital and debt choice
title_sort Brand capital and debt choice
author_id_str_mv 43999fff86cd8a29f4815fb4dfa47729
author_id_fullname_str_mv 43999fff86cd8a29f4815fb4dfa47729_***_Sabri Boubaker
author Sabri Boubaker
author2 Nurul Alam
Sabri Boubaker
Xiaomeng Charlene Chen
Mostafa Monzur Hasan
format Journal article
container_title International Review of Financial Analysis
container_volume 93
publishDate 2024
institution Swansea University
issn 1057-5219
1873-8079
doi_str_mv 10.1016/j.irfa.2024.103160
publisher Elsevier BV
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 1
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description This paper investigates the effect of brand capital on firms' choices of debt structure. Using a sample of publicly listed U.S. firms between 2001 and 2019, we find that firms with higher levels of brand capital rely less on bank debt financing. This finding is robust to the use of alternative regression models and alternate measures of brand capital and bank debt financing. Employing an industry-level positive shock to brand capital as a quasi-natural experiment, we demonstrate that such a shock negatively affects firms' reliance on bank debt. Our cross-sectional analyses reveal that the effect of brand capital on bank debt is more pronounced for firms with high information asymmetry, weak corporate governance mechanisms, and poor financial conditions. We also find that brand capital-intensive firms raise funds from the public debt market and issue more (or less) unsecured (or secured) debt. Taken together, we show that brand capital has an important bearing on corporate financing decisions.
published_date 2024-05-01T09:35:55Z
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score 11.059465

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