Does geography matter in a geographically small and culturally homogeneous country? Firm location and corporate credit risk

Tsung-Kang Chen*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

This study explores whether or not the geography characteristics of a firm's headquarters location affect the firm's credit risk in a geographically small and culturally homogeneous country by employing firm location data in Taiwan from the year 2005 to 2011. Empirical results of this study show that rural firms have higher credit risk than urban firms. In addition, the firm location effect is mainly through the channels of incomplete information and financial leverage. Moreover, the study also finds that a firm's market-debt financing distance is positively associated with its credit risk while the firm's banking-debt financing distance has insignificant effect.

Original languageEnglish
Pages (from-to)323-348
Number of pages26
JournalInternational Review of Economics and Finance
Volume44
DOIs
StatePublished - 1 Jul 2016

Keywords

  • Credit risk
  • Financing distance
  • Firm location
  • Geographically small country (Taiwan)
  • Structural form credit models

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