Abstract

http://ssrn.com/abstract=239724
 
 

References (48)



 
 

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Debt and Expropriation


Mara Faccio


Purdue University - Krannert School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Larry H.P. Lang


The Chinese University of Hong Kong (CUHK) - Department of Finance

Leslie Young


The Chinese University of Hong Kong (CUHK) - Department of Finance

July 1, 2003

EFMA 2001 Lugano Meetings

Abstract:     
We regress leverage on an index of corporate exposure to expropriation by the controlling shareholder - the ratio of his ownership rights O to his control rights C - and on an index of creditor rights. Amongst corporations that can access related party loans, a lower O/C ratio increases leverage when creditor protection is weak; but reduces leverage where creditor protection is strong. In the first case, higher leverage gives the controlling shareholder control of more resources to expropriate. In the second case, minority shareholders and external lenders constrain the leverage of group affiliates that seemed more vulnerable to expropriation.

Note: Previously titled "Debt, Agency Costs and Institutions"

Number of Pages in PDF File: 35

Keywords: Debt, corporate governance, business groups, expropriation

JEL Classification: G32, F23, F30

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Date posted: September 29, 2000  

Suggested Citation

Faccio, Mara and Lang, Larry H.P. and Young, Leslie, Debt and Expropriation (July 1, 2003). EFMA 2001 Lugano Meetings. Available at SSRN: http://ssrn.com/abstract=239724 or http://dx.doi.org/10.2139/ssrn.239724

Contact Information

Mara Faccio (Contact Author)
Purdue University - Krannert School of Management ( email )
1310 Krannert Building
West Lafayette, IN 47907-1310
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Hsien Ping Larry Lang
The Chinese University of Hong Kong (CUHK) - Department of Finance ( email )
Shatin, N.T.
Hong Kong
+85 2 2609 7761 (Phone)
+85 2 2603 6586 (Fax)
Leslie S.F. Young
The Chinese University of Hong Kong (CUHK) - Department of Finance ( email )
Shatin, N.T.
Hong Kong
852 2609 7421 (Phone)
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