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- Title
Online Reputation and Debt Capacity.
- Authors
Derrien, François; Garel, Alexandre; Romec, Arthur; Weisskopf, Jean-Philippe
- 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.
- Subjects
PARIS (France); RESTAURANTS; CONSUMERS' reviews; DEBT; REPUTATION
- Publication
Journal of Financial & Quantitative Analysis, 2024, Vol 59, Issue 3, p1100
- ISSN
0022-1090
- Publication type
Article
- DOI
10.1017/S0022109023000248