Legal variation and capital structure: comparing listed and non-listed companies

Thomas Hall and Frederick Joergensen

European Journal of Law and Economics, 2015, vol. 40, issue 3, 543 pages

Abstract: We exploit the natural institutional variation in Western Europe to examine leverage (and debt maturity) for listed and non-listed companies (NLCs). We find that the legal efficiency measure (Djankov et al. 2008 ) is more closely related to the amount of leverage and debt maturity than is the creditor rights score of La Porta et al. (Law and Finance, NBER working paper 5661, 1996 ; J Financ 52:1131–1151, 1997 ). One component of the standard measure of creditor rights was consistently and positively associated with leverage: whether secured creditors are paid first in the event of distress. Firms located in French and German legal family countries have less leverage than companies in common law setting, but Scandinavian firms have more. Asset specificity has a negative impact on leverage, but a positive impact on debt maturity. Finally, using a matched sample of otherwise similar privately held companies, we find that listed firms have less debt, consistent with a corporate governance interpretation that presumably more dispersed publicly traded firms are more likely to avoid the disciplining device of leverage. The findings are robust to use of industry-level fixed effects. Copyright Springer Science+Business Media, LLC 2015

Keywords: Legal origin; Creditor rights; Leverage; Debt maturity; G32; G33; F30 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10657-012-9359-7 (text/html)
Access to full text is restricted to subscribers.

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:kap:ejlwec:v:40:y:2015:i:3:p:511-543

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10657

DOI: 10.1007/s10657-012-9359-7

Access Statistics for this article

European Journal of Law and Economics is currently edited by Jürgen Georg Backhaus, Giovanni B. Ramello and Alain Marciano

More articles in European Journal of Law and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().