Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper examines whether parent-subsidiary dispersion affects the cost of debt. Prior literature is silent on the relationship between firms' locations and debt cost in the unique setting of the Chinese credit market. Using a comprehensive dataset of Chinese A-share listed firms during 2003–2019, we find that geographical and institutional dispersion between parent companies and their subsidiaries are positively associated with debt cost. This effect is more pronounced for firms: (a) with fewer government subsidies, (b) without political connections and (c) with male CEOs/chairman. However, this effect is not significant for (i) firms cross-listed on B or H share and (ii) for firm-level observations during the implementation of the 4 trillion stimulus package. Lastly, while testing for plausible channels, we find that parent-subsidiary dispersion can increase the debt default by raising debt cost. Overall, these findings provide new evidence on how a firm's geographical dispersion can determine debt financing costs.