Institutions Arrangements and Debt Financing

50 Pages Posted: 22 Sep 2012 Last revised: 9 Feb 2015

Date Written: November 14, 2013


We 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, we 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.

Keywords: debt placement, bond yield, legal protection, institutional arrangements

JEL Classification: G32, G33, F34, K20

Suggested Citation

Zhang, Shage, Institutions Arrangements and Debt Financing (November 14, 2013). Available at SSRN: or

Shage Zhang (Contact Author)

Trinity University ( email )

San Antonio, TX 78212
United States

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