Legal Variation and Capital Structure: Comparing Listed and Non-Listed Companies

45 Pages Posted: 24 Oct 2012

See all articles by Thomas W. Hall

Thomas W. Hall

Christopher Newport University

Fredrik Jörgensen

Stockholm University - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 23, 2012


We exploit the natural institutional variation in Western Europe to examine leverage (and debt maturity) for listed and non-listed companies (NLCs). We find that the legal efficiency measure (Djankov, et al, 2008) is more closely related to the amount of leverage and debt maturity than is the creditor rights score of La Porta, et al (1996; 1997). One component of the standard measure of creditor rights was consistently and positively associated with leverage: whether secured creditors are paid first in the event of distress. Firms located in French and German legal family countries have less leverage than companies in common law setting, but Scandinavian firms have more. Asset specificity has a negative impact on leverage, but a positive impact on debt maturity. Finally, using a matched sample of otherwise similar privately held companies, we find that listed firms have less debt, consistent with a corporate governance interpretation that presumably more dispersed publicly traded firms are more likely to avoid the disciplining device of leverage. The findings are robust to use of industry-level fixed effects.

Keywords: legal origin, creditor rights, leverage, debt maturity

JEL Classification: G32, G33, F30

Suggested Citation

Hall, Thomas William and Jörgensen, Fredrik A., Legal Variation and Capital Structure: Comparing Listed and Non-Listed Companies (October 23, 2012). European Journal of Law and Economics, Forthcoming, Available at SSRN:

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

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