Legal Rights Matter: Evidence from Panel Data on Creditor Protection and Debt

International Finance Review, Vol. 9, 2008

44 Pages Posted: 8 Jun 2008  

Thomas W. Hall

Christopher Newport University

Fredrik Jörgensen

Stockholm University - School of Business

Abstract

Using panel data derived from recent financial statements, we examine the relationship between changing creditor protection and leverage (and debt maturity) in a number of emerging market countries located in Central and Eastern Europe. We examine unlisted firms, which are more likely than listed companies to face credit constraints. Our main hypothesis is whether unlisted firms change their leverage and debt maturity as creditor rights increase. We confirm this to be the case at both the country- and firm-level; our findings are robust to alternative econometric specifications and inclusion of country-level and firm-level controls. We also find that legal origin is related to the level of debt and its maturity.

Keywords: Investor Protection, Creditor Rights, Leverage, Debt Maturity, Emerging Markets

JEL Classification: G21, G30, K20

Suggested Citation

Hall, Thomas W. and Jörgensen, Fredrik, Legal Rights Matter: Evidence from Panel Data on Creditor Protection and Debt. Available at SSRN: https://ssrn.com/abstract=1141869

Thomas William Hall (Contact Author)

Christopher Newport University ( email )

United States

Fredrik A. Jörgensen

Stockholm University - School of Business ( email )

Roslagsvägen 1010
Stockholm, SE-106 91
Sweden

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