Which factors affect the bond spread of Norwegian firms? : the empirical relation of board structure and characteristics of firms

Abstract

I intend to analyse to which extent the characteristics of firms and the structure of the board of directors is taken into account by creditors deciding when to invest in a corporate bond issue or not. The perception of creditors is extracted by analyzing how the corporate bonds spread relates to board independence, experience, diversity and size which may be considered to be important determinants of corporate governance and performance of the board. Technically, the results are documented using multiple regression models estimated by ordinary least squares on a dataset consisting of 1341 bonds. My findings include a negative relation of experience and a positive relation of board size to the corporate bond spread, while my findings are inconclusive with respect to board diversity and independence. In sum, these results explain how investors either explicitly or implicitly take into account the structure of the board before investing in corporate bonds. With regard to the firm, I document a relation of size, asset turnover and return volatility, while leverage seems unrelated to the spread.