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Online Reputation and Debt Capacity

Abstract : This paper explores the effects of online customer ratings on debt capacity. 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 variation in customer ratings resulting from the rounding of scores in regression discontinuity tests to establish causality. Customer ratings affect financial policy through a reduction in cash flow risk and higher resilience to demand shocks. Restaurants with good ratings use their extra debt capacity to invest in tangible assets. Finally, favorable online ratings relax credit constraints mostly for moderately constrained restaurants.
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Preprints, Working Papers, ...
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https://hal-hec.archives-ouvertes.fr/hal-02896691
Contributor : Antoine Haldemann Connect in order to contact the contributor
Submitted on : Friday, July 10, 2020 - 4:56:56 PM
Last modification on : Monday, February 22, 2021 - 3:26:02 PM

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François Derrien, Alexandre Garel, Arthur Petit-Romec, Jean-Philippe Weisskopf. Online Reputation and Debt Capacity. 2020. ⟨hal-02896691⟩

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