Using firm-level data from 51 countries, we document evidence that creditor protection is an important country-level determinant of corporate capital structure. Specifically, strong creditor rights are associated with low long-term leverage across countries. This pattern is robust to controlling for key firm characteristics and various country-level factors. We also find that under strong creditor protection, firms tend to substitute safe capital (i.e., shareholders’ equity) for longterm debt. The observed negative relation between creditor rights and leverage is not consistent with the supply-side view that strong creditor protection results in high corporate leverage because it induces lenders to provide credit at favorable terms. Instead, our results supports the demand-side view that strong creditor protection discourages firms from making long-term cash flow commitments to service debt because managers and shareholders avoid the risk of losing jobs and control in case of financial distress.
JEL classification: G15; G32; G33; K22
Key words: Creditor rights; Investor protection; Capital structure; Debt maturity
학회소식
공지사항
[2011년 제 4차] Creditor Rights and Capital Structure: Evidence fro
작성자 : 관리자
조회수 : 807
게시일 :
2011-12-07