Abstract
We investigate a particular aspect of creditor rights, judicial efficiency, and its influence on firms' corporate leverage in 69 countries. Increasing creditor rights makes credit more readily available due to greater loan supply, but firms use less leverage to avoid premature liquidation. We find that efficient judicial systems are associated with lower corporate leverage ratios. Managers perceive higher leverage in the presence of more efficient judicial systems as a serious threat to their jobs or private benefits continuing. Our results indicate that stronger creditor rights alone do not explain corporate leverage without taking into account efficient enforcement of these rights.
Original language | English |
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Pages (from-to) | 255-274 |
Number of pages | 20 |
Journal | Journal of Corporate Finance |
Volume | 44 |
DOIs | |
State | Published - Jun 1 2017 |
Bibliographical note
Publisher Copyright:© 2017
Keywords
- Capital structure
- Judicial efficiency
- Leverage
ASJC Scopus subject areas
- Business and International Management
- Finance
- Economics and Econometrics
- Strategy and Management