Judicial efficiency and capital structure: An international study

Attaullah Shah (), Hamid Ali Shah, Jason M. Smith and Labianca, Giuseppe (Joe)

Journal of Corporate Finance, 2017, vol. 44, issue C, 255-274

Abstract: We investigate a particular aspect of creditor rights, judicial efficiency, and its influence on firms' corporate leverage in 69 countries. Increasing creditor rights makes credit more readily available due to greater loan supply, but firms use less leverage to avoid premature liquidation. We find that efficient judicial systems are associated with lower corporate leverage ratios. Managers perceive higher leverage in the presence of more efficient judicial systems as a serious threat to their jobs or private benefits continuing. Our results indicate that stronger creditor rights alone do not explain corporate leverage without taking into account efficient enforcement of these rights.

Keywords: Capital structure; Leverage; Judicial efficiency (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:44:y:2017:i:c:p:255-274

DOI: 10.1016/j.jcorpfin.2017.03.012

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