Legal variation and capital structure: comparing listed and non-listed companies
Purchase on Springer.com
$39.95 / €34.95 / £29.95*
Rent the article at a discountRent now
* Final gross prices may vary according to local VAT.
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.
- Acharaya, V., Sundaram, R., & Kose, J. (2004). On the capital structure implications of bankruptcy codes. London Business School working paper.
- Acharaya, V., Sundaram, R., & Kose, J. (2008). Cross-country variations in capital structure and the role of bankruptcy codes. New York University working paper.
- Aggarwal, R., & Jamdee, S. (2003). Determinants of capital structure: Evidence from the G-7 countries. Kent State University working paper.
- Asker, J., Farre-Mensa, J., & Ljungqvist, A. (2011). Comparing the investment behavior of public and private firms. New York University working paper.
- Beck, T., Demirgüç-Kunt, A., & Maksimovic, V. (2002). Funding growth in bank based and market-based financial systems: Evidence from firm level data. Journal of Financial Economics, 65, 337–363. CrossRef
- Beck, T., Demirgüç-Kunt, A., & Maksimovic, V. (2004). Bank competition and access to finance: International evidence. Journal of Money Credit and Banking, 36, 627–648. CrossRef
- Booth, L., Aivazian, V., Demirgüç-Kunt, A., & Maksimovic, V. (2001). Capital structures in developing countries. Journal of Finance, 56, 87–130. CrossRef
- De Jong, A., Kabir, R., & Thu Nguyen, T. (2008). Capital structure around the world: The roles of firm- and country-specific determinants. Journal of Banking & Finance. doi:10.1016/j.jbankfin.2008.12.034.
- Deloitte, & Touche (2000). IAS Plus Accounting Standards available at http://www.iasplus.com/dttpubs/ce2000.pdf.
- Demirgüç-Kunt, A., & Maksimovic, V. (1998). Law, finance, and firm growth. Journal of Finance, 53, 2107–2137. CrossRef
- Demirgüç-Kunt, A., & Maksimovic, V. (1999). Institutions, financial markets, and firm debt maturity. Journal of Financial Economics, 54, 295–336. CrossRef
- Djankov, S., Hart, O., McLiesh, C., & Shleifer, A. (2008). Debt enforcement around the world. Journal of Financial Economics, 116(6), 1105–1149. CrossRef
- Fan, J. P. H., Titman, S., & Twite, G. (2012). International comparison of capital structure and debt maturity choices. Journal of Financial and Quantitative Analysis, 47(1).
- Frank, M., & Goyal, V. (2005). Tradeoff and pecking order theories of debt. In B. E. Eckbo (Ed.), Handbook of corporate finance; empirical corporate finance (North-Holland, Handbooks in Finance Series), Chap. 7.
- Giannetti, M. (2003). Do better institutions mitigate agency problems? Evidence from corporate finance choices. Journal of Financial and Quantitative Analysis, 38, 185–212.
- Hall, T. (2012). The collateral channel: Evidence on leverage and asset tangibility. Journal of Corporate Finance, 18(3), 570–583.
- Hall, T., & Jörgenson, F. (2008). Legal rights matter: Evidence from panel data on creditor protection and debt. International Finance Review, 9(Part V), 303–336.
- Klapper, L., Sarria-Allende, V., & Sulla, V. (2002). Small and medium-sized enterprise financing, in Eastern Europe. World Bank working paper.
- La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2008). The economic consequences of legal origin. Journal of Economic Literature, 46(2), 285–332. CrossRef
- La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1996). Law and finance. NBER working paper 5661.
- La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1997). Legal determinants of external finance. NBER working paper 5879.
- La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1998). Law and finance. Journal of Political Economy, 106, 1113–1155. CrossRef
- Martel, S., & Reisel, N. (2009). The real benefit of being public: Evidence from public and private firms. University of Memphis working paper.
- Schmuckler, S., & Vesperoni, E. (2000). Firms’ financing choices in bank-based and market-based economies. World Bank working paper.
- Sheen, A. (2009). Do public and private firms behave differently? An examination of investment in the chemical industry. UCLA Working Paper.
- Song, J., & Philippatos, G. (2004). Have we resolved some critical issues related to international capital structure? Empirical evidence from the 30 OECD countries. University of Tennessee Working Paper.
- Wald, J. (1999). How firm characteristics affect capital structure: An international comparison. The Journal of Financial Research, 22, 161–188.
- Legal variation and capital structure: comparing listed and non-listed companies
European Journal of Law and Economics
- Print ISSN
- Online ISSN
- Springer US
- Additional Links
- Legal origin
- Creditor rights
- Debt maturity
- Industry Sectors