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Debt choice in the regulated competition era

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  • Wong, Raymond M.K.
  • Dak-Adzaklo, Cephas Simon Peter
  • Lo, Agnes W.Y.

Abstract

We examine the impact of intensifying competition laws on corporate debt financing choice. Analogous to the argument that intensifying competition spurs improvements in corporate governance, which decreases the demand for bank monitoring and hence bank debt, we find a negative association between stringent competition laws and bank debt reliance. This effect is amplified for firms with lower information quality, firms in concentrated industries, and firms in countries with weaker institutional environments. Additional analyses show that the bank debt-reducing effect of competition increases overall firm value, which demonstrate the value-enhancing effect of regulated competition. Our study is contributory to the recent debate on reforming competition laws to promote economic growth.

Suggested Citation

  • Wong, Raymond M.K. & Dak-Adzaklo, Cephas Simon Peter & Lo, Agnes W.Y., 2024. "Debt choice in the regulated competition era," Journal of International Money and Finance, Elsevier, vol. 142(C).
    • Handle: RePEc:eee:jimfin:v:142:y:2024:i:c:s0261560624000329
    DOI: 10.1016/j.jimonfin.2024.103045
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    More about this item

    Keywords

    Public and private debt markets; Competition laws; Corporate governance;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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