Governance and Leverage: International Evidence

The Financial Review, forthcoming

45 Pages Posted: 20 Nov 2020 Last revised: 14 Sep 2022

See all articles by Hamdi Driss

Hamdi Driss

Saint Mary's University

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

John K. Wald

University of Texas at San Antonio

Date Written: October 2, 2020

Abstract

In this study, we use board reforms across countries as a natural experiment to examine the effect of governance on firm leverage. We find that board reforms are associated with a statistically significant 1-percentage-point increase in leverage overall, and a 5-percentage-point increase on average for firms that had to make large board changes. These results are robust to a variety of specifications and to controls for potential confounding events. The increase in leverage is also larger for firms in weak shareholder rights countries, suggesting that other shareholder rights can substitute in part for board reforms.

Suggested Citation

Driss, Hamdi and El Ghoul, Sadok and Guedhami, Omrane and Wald, John K., Governance and Leverage: International Evidence (October 2, 2020). The Financial Review, forthcoming, Available at SSRN: https://ssrn.com/abstract=3704053 or http://dx.doi.org/10.2139/ssrn.3704053

Hamdi Driss

Saint Mary's University ( email )

923 Robie St.
Saint Mary's University - FISMS
Halifax, Nova Scotia B3H 3C3
Canada

HOME PAGE: http://Hamdi.Driss@smu.ca

Sadok El Ghoul (Contact Author)

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

John K. Wald

University of Texas at San Antonio ( email )

1 UTSA Circle
San Antonio, TX 78249
United States
210-458-6324 (Phone)

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