The impact of ICT diffusion on sovereign cost of debt
by Apostolos Kotzinos; Dimitris Psychoyios; Nikolaos Vlastakis
International Journal of Banking, Accounting and Finance (IJBAAF), Vol. 12, No. 1, 2021

Abstract: We examine the effect of a country's level of information and communication technologies (ICT) diffusion on its credit rating and cost of debt. ICT diffusion is approximated using the Networked Readiness Index, which is designed to capture a country's capacity and preparedness to participate in the digital economy. We adopt a modified random effects approach which allows us to distinguish between short and long run effects on a dataset of 65 countries for a time span of ten years. We show that ICT have a significant impact on a country's credit rating and cost of debt which is robust to the presence of other variables proposed in the literature. The effect is stronger for non-OECD countries, indicating a pathway for developing countries to improve their access to debt markets. Our conclusions are robust to the advent of the recent financial crisis.

Online publication date: Tue, 15-Dec-2020

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