A Study on the Effects of Corporate Governance on Cost of Debt: Focusing on the Moderating Effects of Market Competition

This study empirically analyzed the relationship between corporate governance and cost of debt, focusing on the moderating effects of market competition.As a result of the analysis, it was found that companies can reduce cost of debt by improving corporate governance.In particular, companies, having weak external governance due to low market competition, were able to enjoy the greater effect of the reduction of cost of debt by improving corporate governance.These results imply that corporate governance can lead an increase in credit rating and a decrease in cost of debt by reducing agency cost and lowering default risk, and that the effects of corporate governance on cost of debt can be differentiated according to the market competition.The implications of this study are as follows.Companies can alleviate the burden of high-interest rates by improving corporate governance, and in particular, companies having lower market competition will be able to strengthen financial competitiveness by improving corporate governance.The government will be able to strengthen the financial soundness of companies and resolve the Korea discount in the bond market by preparing an appropriate system to induce improvement of corporate governance.