Using 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 levels of long-term debt. This pattern is robust to controlling for key firm characteristics (e.g., firm size, profitability, asset tangibility and growth opportunities) and various country-level factors (e.g., legal origin, financial market development and per capital GDP). In contrast, the effect of shareholder rights on leverage is relatively weak. The observed negative relation between creditor rights and leverage is not consistent with the view that strong creditor protection induces lenders to provide credit to firms at favorable terms, resulting in high corporate leverage. Rather, our results support the view that strong creditor protection discourages managers from making long-term cash flow commitments to service debt because of the high likelihood of losing control in case of financial distress.
JEL classification: G15; G32; G33; K22
Key words: Creditor rights; Investor protection; Capital structure; Debt maturity
학회소식
학회소식
[2011년 제 1차] Creditor Rights and Capital Structure:Evidence from
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2011-02-23
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