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Institutional arrangements and debt financing

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  • Zhang, Shage

Abstract

I find that institutional arrangements have an impact on the real economy by affecting firms’ choice between private and public debt and the subsequent financing costs. Using new debt issued by firms in 26 non-US countries, I find, after controlling for firm characteristics predicted by debt agency and information asymmetry theories, that the level of financial market development, the efficiency of bankruptcy procedure, the integrity and enforceability of laws, and the transparency of financial information have significant impacts not only on firms’ debt choice and yield to maturity in domestic debt market, but also their issuance choice in the international debt market.

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  • Zhang, Shage, 2016. "Institutional arrangements and debt financing," Research in International Business and Finance, Elsevier, vol. 36(C), pages 362-372.
    • Handle: RePEc:eee:riibaf:v:36:y:2016:i:c:p:362-372
    DOI: 10.1016/j.ribaf.2015.10.006
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    More about this item

    Keywords

    Debt placement; Bond yield; Legal protection; Institutional arrangements;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • K20 - Law and Economics - - Regulation and Business Law - - - General

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