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Open AccessFeature PaperArticle

Groups, Pricing, and Cost of Debt: Evidence from Turkey

1
College of Business Administration, University of Central Florida, FL 32816, USA
2
Gabelli School of Business, Fordham University, NY 10023, USA
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Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2018, 11(1), 14; https://doi.org/10.3390/jrfm11010014
Received: 13 February 2018 / Revised: 13 March 2018 / Accepted: 13 March 2018 / Published: 16 March 2018
(This article belongs to the Collection Empirical Asset Pricing)
The paper examines the impact of business group affiliation on cost of loans in an emerging market setting. It focuses on operational strategy, organizational structure and internationalization policies of business group firms and their impact on borrowing cost of affiliated firms. Bank loans are a dominant source of corporate funding in emerging markets, in which business groups exist as leading economic entities. Yet, the impact of belonging to a group on the firm’s cost of debt has not been studied in depth. Our results reveal that the extent of group affiliation, government ownership, and diversification increase the cost of loans. However, a group bank is advantageous in terms of borrowing, and decreases the cost of loans. While foreign ownership is beneficial in terms of pricing, being affiliated with a foreign group is not. Being a financial firm and being cross-listed are not significantly associated with bank loan terms. Borrowing costs are thus influenced in various ways by organizational structure, operational strategies, and global policies of business groups and affiliates. Therefore, business groups may benefit from strategically implementing policies and selecting loan applicant firms. View Full-Text
Keywords: business groups; cost of loans; corporate governance; emerging markets; Turkey business groups; cost of loans; corporate governance; emerging markets; Turkey
MDPI and ACS Style

Küllü, A.M.; Raymar, S. Groups, Pricing, and Cost of Debt: Evidence from Turkey. J. Risk Financial Manag. 2018, 11, 14.

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