The impact of bank regulation on firms’ capital structure: Evidence from multinationals

Lucas Avezum, Harry Huizinga and Louis Raes

Journal of Banking & Finance, 2022, vol. 138, issue C

Abstract: This paper examines how the capital structure of non-financial firms is affected by international variation in bank regulation. A concise model yields an estimating equation that relates a firm's capital structure to bank regulatory variables and their interactions with the tax rate reflecting the tax deductibility of interest. We identify an effect of bank regulation on leverage by considering establishments of the same multinational firm located in different countries. Our results indicate that capital regulation stringency and official supervisory power are negatively related to firm leverage, while restrictions on non-lending activities and on financial conglomerates vary positively with firm leverage. High tax rates mitigate these effects.

Keywords: Capital structure; Bank regulation; Multinational corporation; Taxation (search for similar items in EconPapers)
JEL-codes: F23 G28 G32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426622000590
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:jbfina:v:138:y:2022:i:c:s0378426622000590

DOI: 10.1016/j.jbankfin.2022.106459

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

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