Digitalization and cost of corporate debt

: an analysis of the European landscape at a general, country, and industry level

Abstract

Digitalization has totally revolutionised our life over the last years. But to which extent has it impacted companies’ financials? This thesis tries to understand, at a European level, the ramifications of digitalization on the cost of corporate debt. It scrutinizes this impact from three distinct angles: a general viewpoint, a country-specific analysis, and an industry-based examination. The empirical analysis leverages data from firms listed in the STOXX600 index. The degree of digitalization within the European Union is gauged using the annually published Digital Intensity Level in Businesses Index by EUROSTAT. The study encompasses a comprehensive sample of 19,752 observations, spanning 15 countries and 55 industries over a decade from 2015 to 2024. A panel data regression model serves as the analytical framework for this investigation. The lack of statistical significance at conventional levels, and the consequent non reliability of the results failed to reject the null hypothesis for the three hypotheses tested. Despite these limitations, some relevant insights can be extracted from this work at a macro level: an augmentation in digitalization is directly correlated with an escalation in the cost of corporate debt. Subsequently, at a country and industry level, it has been noticed that the findings obtained differ, in both the cases, in terms of sign and magnitude, showing heterogeneity on the impact of digitalization. The complexity of the digitalization phenomenon and its multifaceted implications for corporate finance are highlighted by these findings. This work, therefore, tries to contribute to the research in this dynamic and consequential field.

Date of Award	24 Jun 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Diana Bonfim (Supervisor)