Credit Market Freedom and Corporate Decisions

Andrea Calef, Ifigenia Georgiou and Alfonsina Iona
Additional contact information
Ifigenia Georgiou: School of Business, University of Nicosia
Alfonsina Iona: School of Economics and Finance, Queen Mary University of London

No 2022-09, University of East Anglia School of Economics Working Paper Series from School of Economics, University of East Anglia, Norwich, UK.

Abstract: Despite the extensive empirical evidence of a positive impact of economic freedom on economic growth, the influence of economic freedom and its components on a firms level of cash, leverage and investment remains an unexplored issue in microeconomics and corporate finance research. In this study, we contribute towards filling this gap by examining whether Credit Market Freedom - an important component of the Economic Freedom Index – influences corporate decisions. In particular, we study whether and to what extent Credit Market Freedom affects a firms target level of investment, cash holdings, and leverage. We observe the behavior of a large and heterogeneous sample of North American non-financial firms over the period 2000-2019. Our empirical results suggest that higher Credit Market Freedom is associated with a healthier corporate capital structure, higher financial flexibility, and a friendlier investment environment.

Keywords: Economic Freedom; Corporate Decisions; Capital Structure (search for similar items in EconPapers)
JEL-codes: G10 G18 G30 G31 (search for similar items in EconPapers)
Date: 2022-11
New Economics Papers: this item is included in nep-cfn, nep-fdg and nep-fmk
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Journal Article: Credit Market Freedom and Corporate Decisions (2023)
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