Abstract
Agency theory predicts that the default premium on debt is determined by the intensity of agency conflicts since they affect the risk of debtholders. This effect is especially important in emerging countries with high ownership concentration and low protection of minority owners. This paper presents an empirical analysis of the influence of ownership structure and board independence on the cost of debt in BRIC countries over the period 2007–2020. The main finding of the study is the presence of significant country-specific effects of ownership structure on the cost of debt measured with the G-spread on corporate bonds, as well as the absence of effects of board independence. According to our results, concentrated ownership and state ownership increase the cost of debt in Brazil and Russia, while decreasing it in China. We reveal that institutional investors help mitigate the risks of debtholders in China, while insider ownership decreases the default risk in Brazil.
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