Creditor rights and capital structure: Evidence from international data

Seong-Soon Cho, Sadok El Ghoul, Omrane Guedhami and Jungwon Suh

Journal of Corporate Finance, 2014, vol. 25, issue C, 40-60

Abstract: For a large sample of 48 countries, we find robust evidence that strong creditor rights are associated with low long-term leverage across countries. We further find that strong creditor protection lowers long-term debt issuance, the extent to which investments are financed with long-term debt, and target leverage ratios. Finally, we find that firm and country characteristics influence the link between creditor protection and long-term leverage. Our results support 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 control in the case of financial distress.

Keywords: Creditor rights; Investor protection; Capital structure; Bankruptcy (search for similar items in EconPapers)
JEL-codes: G15 G32 G33 K22 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (83)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119913000977
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:25:y:2014:i:c:p:40-60

DOI: 10.1016/j.jcorpfin.2013.10.007

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().