Title: Ownership identity and cost of debt in an emerging market: pre- and post-crisis analysis

Authors: Imad Jabbouri; Maryem Naili; Chaimae Nouina

Addresses: School of Business Administration, Al Akhawayn University in Ifrane, Ifrane, Morocco ' The Higher Institute of Commerce and Business Administration – Groupe ISCAE, Casablanca, Morocco ' School of Business Administration, Al Akhawayn University in Ifrane, Ifrane, Morocco

Abstract: This research investigates the relationship between ownership identity and cost of debt in the emerging market of Morocco spanning the period from 2004 to 2016. The study employs a panel data analysis and documents that the presence of institutional ownership is negatively related to cost of debt, whereas the presence of family ownership is positively related to cost of debt. Ownership identity reflects a given quality of governance mechanisms within the firm, which affects creditors' confidence positively or negatively. This study pursues innovation by examining whether the value relevance of ownership identity changes as market conditions change. The results are more pronounced in the post-crisis period compared to the pre-crisis period. We argue that the incentives for insiders to expropriate increase during economic downturns. Mindful of the deterioration of corporate governance during economic slumps, the importance creditors attach to ownership identity, as an indicator of governance quality, increases during the post-crisis period.

Keywords: ownership identity; cost of debt; corporate governance; financial crisis; agency problems; emerging markets.

DOI: 10.1504/IJCG.2019.103234

International Journal of Corporate Governance, 2019 Vol.10 No.3/4, pp.311 - 334

Received: 21 May 2018
Accepted: 18 Jun 2019

Published online: 21 Oct 2019 *

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