Local Financial Development and Corporate Financial Policy

  • Maurizio La RoccaEmail author
  • Tiziana La Rocca
  • Alfio Cariola


The aim of the present study is to explain both capital-structure and debt-maturity choices for small and medium-size firms in terms of institutional differences at the local level. In particular, local financial development, the effectiveness of the local enforcement system, together with other firm-specific characteristics, are considered. The empirical analysis is strictly based on the indicator created by (Guiso, Sapienza, & Zingales, 2004) while the methodological approach is similar to (Barclay, Marx, & Smith, 2003). We found that capital-structure and debt-maturity choices interact with each other and that corporate financial decisions are influenced by institutional factors. In contrast to (Barclay et al., 2003) and to reports in the Italian literature, the results of the analysis showed that leverage and debt-maturity are complementary factors. Leverage was found to be positively affected by local financial development while the enforcement system was less relevant. Debt maturity resulted longer in regions with better enforcement of the law, whereas local financial development did not play a relevant role. Other interesting findings regarding the role of credit worthiness, measured through the corporate financial rating, are also discussed.


Financial Development Capital Structure Ownership Concentration Debt Maturity Enforcement System 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer Physica-Verlag Berlin Heidelberg 2009

Authors and Affiliations

  • Maurizio La Rocca
    • 1
    Email author
  • Tiziana La Rocca
    • 1
  • Alfio Cariola
    • 1
  1. 1.Dipartimento di Scienze AziendaliUniversity of CalabriaBucciItaly

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