European Business Schools Librarian's Group
HEC Research Papers Series,
HEC Paris
No 1367: Online Reputation and Debt Capacity
François Derrien, Alexandre Garel, Arthur Romec and Jean-Philippe Weisskopf
Additional contact information
François Derrien: HEC Paris
Alexandre Garel: Audencia Business School
Arthur Romec: Toulouse Business School
Jean-Philippe Weisskopf: EHL Hospitality Business School
Abstract: This paper explores the effects of online customer ratings on financial policy. Using a large sample of Parisian restaurants, we find a positive and economically significant relation between customer ratings and bank debt. We use the locally exogenous variations in customer ratings resulting from the rounding of scores in regression discontinuity tests to establish causality. Customer ratings have more impact on debt when information asymmetry is higher. They affect financial policy through a reduction in cash flow risk and greater resilience to demand shocks. Restaurants with good ratings use their extra debt to invest in tangible assets.
Keywords: online reputation; customer ratings; corporate debt; corporate investment
69 pages, March 9, 2020
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