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Online Reputation and Debt Capacity
Resource type
Authors/contributors
- Derrien, François (Author)
- Garel, Alexandre (Author)
- Romec, Arthur (Author)
- Weisskopf, Jean-Philippe (Author)
Title
Online Reputation and Debt Capacity
Abstract
We explore the effects of online customer ratings on financial policy. Using a large sample of Parisian restaurants, we find a positive and economically significant relationship between customer ratings and restaurant debt. We use the locally exogenous variations in customer ratings resulting from the rounding of scores in regression discontinuity tests to establish causality. Favorable online ratings reduce cash flow risk and increase resilience to demand shocks. Consistent with the view that good online ratings increase the debt capacity of restaurants and their growth opportunities, restaurants with good ratings use their extra debt to invest in tangible assets.
Publication
Journal of Financial and Quantitative Analysis
Volume
59
Issue
3
Pages
1100-1140
Date
2024/05
Language
en
ISSN
0022-1090, 1756-6916
Accessed
6/17/24, 9:32 AM
Library Catalog
Cambridge University Press
Citation
Derrien, F., Garel, A., Romec, A., & Weisskopf, J.-P. (2024). Online Reputation and Debt Capacity. Journal of Financial and Quantitative Analysis, 59, 1100–1140.
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