Ownership–Control Disparity and the Cost of Debt: Evidence from Corporate Bond Yield Spreads in Korea

Ownership–control disparity, defined as the difference between controlling shareholders’ voting rights and cash-flow rights, is a distinctive feature of corporate governance in Korean business groups. Although prior studies have examined its association with firm value and credit ratings, relatively little evidence is available on whether ownership–control disparity is reflected in corporate bond pricing. This study examines the association between ownership–control disparity and corporate bond yield spreads using a sample of publicly listed Korean manufacturing firms from 2011 to 2022. Corporate bond yield spreads are used as a market-based measure of debt financing costs because they incorporate investors’ assessments of credit risk. The empirical results show that firms with greater ownership–control disparity exhibit significantly lower bond yield spreads. The findings suggest that bond investors may view greater ownership–control disparity as being associated with lower corporate credit risk despite potential agency concerns. Consistent results are also obtained when credit ratings are used as an alternative measure of debt financing costs. This study contributes to the literature on corporate governance and debt financing costs by providing market-based evidence on how ownership–control disparity is reflected in corporate bond pricing within the institutional setting of Korean business groups.