The Impact of the Basel II on Corporate Borrowing Activities in Asian Countries

Abstract

Purpose: This study evaluates the impact of Basel II implementation on credit ratings and corporate borrowing activities in Asian countries.
Design/methodology/approach: We sequentially estimate models with dependent variables including firms' credit access and interest costs using the System Generalized Method of Moments (SGMM). Additionally, we conduct robustness tests of the estimates by controlling for the financial crisis factor.
Findings: The results indicate that following Basel II implementation, high-credit-risk firms experienced a reduction in their debt-to-total-assets ratio and faced higher borrowing costs.
Originality/value: This study provides evidence of the impact of capital safety policies on corporate borrowing activities in Asian countries. The findings contribute to both theoretical and practical knowledge, as Asian financial systems possess distinct characteristics compared to developed economies in Europe and North America.