Hostname: page-component-78c5997874-m6dg7 Total loading time: 0 Render date: 2024-11-15T06:56:52.420Z Has data issue: false hasContentIssue false
  • English
  • Français

An International Comparison of Capital Structure and Debt Maturity Choices

Published online by Cambridge University Press:  01 December 2011

Joseph P. H. Fan ,
Sheridan Titman  and
Garry Twite
Joseph P. H. Fan
Affiliation:
Faculty of Business Administration, Chinese University of Hong Kong, Shatin, NT, Hong Kong. pjfan@cuhk.edu.hk
Sheridan Titman
Affiliation:
McCombs School of Business, University of Texas at Austin, 1 University Station, Austin, TX 78712. titman@mail.utexas.edu
Garry Twite
Affiliation:
School of Finance and Applied Statistics, Australian National University, Canberra, ACT 0200, Australia. garry.twite@anu.edu.au
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

This study examines how the institutional environment influences capital structure and debt maturity choices of firms in 39 developed and developing countries. We find that a country’s legal and tax system, corruption, and the preferences of capital suppliers explain a significant portion of the variation in leverage and debt maturity ratios. Specifically, firms in more corrupt countries and those with weaker laws tend to use more debt, especially short-term debt; explicit bankruptcy codes and deposit insurance are associated with higher leverage and more long-term debt. More debt is used in countries where there is a greater tax gain from leverage.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 47 , Issue 1 , February 2012 , pp. 23 - 56
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2012

References

Andrew, D. W. K. “Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation.” Econometrica, 59 (1991), 817–858.Google Scholar
Antoniou, A.; Guney, Y.; and Paudyal, K.. “Determinants of Corporate Capital Structure: Evidence from European Countries.” Working Paper, University of Durham (2006).Google Scholar
Barclay, M. J., and Smith, C. W. Jr. “The Maturity Structure of Corporate Debt.” Journal of Finance, 50 (1995), 609–631 .CrossRefGoogle Scholar
Beck, T., and Demirgüç-Kunt, A.. “Financial Institutions and Markets across Countries and over Time: Data and Analysis.” World Bank Policy Research Working Paper No. 4943 (2009).Google Scholar
Beck, T., and Webb, I.. “Economic, Demographic, and Institutional Determinants of Life Insurance Consumption across Countries.” World Bank Economic Review, 17 (2003), 51–88.Google Scholar
Booth, L.; Aivazian, V.; Demirgüç-Kunt, A.; and Maksimovic, V.. “Capital Structures in Developing Countries.” Journal of Finance, 56 (2001), 87–130.CrossRefGoogle Scholar
Bradley, M.; Jarrell, G. A.; and Kim, H.. “On the Existence of an Optimal Capital Structure: Theory and Evidence.” Journal of Finance, 39 (1984), 857–878.CrossRefGoogle Scholar
Campbell, J., and Hamao, Y.. “Changing Patterns of Corporate Financing and the Main Bank System in Japan.” In The Japanese Main Bank System, Aoki, M. and Patrick, H., eds. Oxford, UK: Oxford University Press (1995).Google Scholar
Claessens, S.; Djankov, S.; and Klapper, L.. “Resolution of Corporate Distress in East Asia.” Journal of Empirical Finance, 10 (2003), 199–216.CrossRefGoogle Scholar
Claessens, S.; Djankov, S.; and Mody, A.. Resolution of Financial Distress: An International Perspective on the Design of Bankruptcy Laws. Washington, DC: World Bank Institute Development Studies (2001).Google Scholar
Claessens, S.; Djankov, S.; and Nenova, T.. “Corporate Risk around the World.” Working Paper, World Bank, CEPR, and Harvard University (2001).CrossRefGoogle Scholar
Claessens, S., and Klapper, L. F.. “Bankruptcy around the World: Explanations of Its Relative Use.” American Law and Economics Review, 7 (2005), 253–283.Google Scholar
Davydenko, S. A. and Franks, J. R.. “Do Bankruptcy Codes Matter? A Study of Defaults in France, Germany and the U.K.” Journal of Finance, 63 (2008), 565–608.CrossRefGoogle Scholar
Degryse, H., and Ongena, S.. “Distance, Lending Relationship and Competition.” Journal of Finance, 55 (2005), 231–266.CrossRefGoogle Scholar
De Jong, A.; Kabir, R.; and Nguyen, T. T.. “Capital Structure around the World: the Roles of Firm- and Country-Specific Determinants.” Journal of Banking and Finance, 32 (2008), 1954–1969.Google Scholar
Demirgüç-Kunt, A.; Karacaovali, B.; and Laeven, L.. “Deposit Insurance around the World: A Comprehensive Database.” Working Paper, World Bank (2005).CrossRefGoogle Scholar
Demirgüç-Kunt, A., and Maksimovic, V.. “Stock Market Development and Financing Choices of Firms.” Word Bank Economic Review, 10 (1996), 341–369.Google Scholar
Demirgüç-Kunt, A., and Maksimovic, V.. “Law, Finance, and Firm Growth.” Journal of Finance, 53 (1998), 2107–2137.Google Scholar
Demirgüç-Kunt, A., and Maksimovic, V.. “Institutions, Financial Markets, and Firm Debt Maturity.” Journal of Financial Economics, 54 (1999), 295–336.Google Scholar
Demirgüç-Kunt, A., and Maksimovic, V.. “Firms as Financial Intermediaries: Evidence from Trade Credit Data.” Working Paper, World Bank and the University of Maryland (2001).Google Scholar
Dinç, I. S. “Politicians and Banks: Political Influences on Government-Owned Banks in Emerging Markets.” Journal of Financial Economics, 77 (2005), 453–479.CrossRefGoogle Scholar
Djankov, S.; Hart, O.; McLiesh, C.; and Shleifer, A.. “Debt Enforcement around the World.” Journal of Political Economy, 116 (2008), 1105–1149.Google Scholar
Djankov, S.; La Porta, R.; Lopez-de-Silanes, F.; and Shleifer, A.. “The Regulation of Entry.” Quarterly Journal of Economics, 117 (2002), 1–37.CrossRefGoogle Scholar
Djankov, S.; La Porta, R.; Lopez-de-Silanes, F.; and Shleifer, A.. “Courts.” Quarterly Journal of Economics, 118 (2003), 453–517.Google Scholar
Fama, E. F., and MacBeth, J. D.. “Risk, Return, and Equilibrium: Empirical Tests.” Journal of Political Economy, 81(1973), 607–636.CrossRefGoogle Scholar
Fisman, R. “Estimating the Value of Political Connections.” American Economic Review, 91 (2001), 1095–1102.CrossRefGoogle Scholar
Fisman, R., and Love, I.. “Trade Credit, Financial Intermediary Development, and Industry Growth.” Journal of Finance, 58 (2003), 353–374.Google Scholar
Gatward, P., and Sharpe, I. G.. “Capital Structure Dynamics with Interrelated Adjustment: Australian Evidence.” Australian Journal of Management, 21 (1996), 89–112.CrossRefGoogle Scholar
Giannetti, M. “Do Better Institutions Mitigate Agency Problems? Evidence from Corporate Finance Choices.” Journal of Financial and Quantitative Analysis, 38 (2003), 185–212.Google Scholar
Graham, J. R. “Taxes and Corporate Finance: A Review.” Review of Financial Studies, 16 (2003), 1075–1129.CrossRefGoogle Scholar
Guedes, J., and Opler, T.. “The Determinants of the Maturity of Corporate Debt Issues.” Journal of Finance, 51 (1996), 1809–1833.CrossRefGoogle Scholar
Johnson, S., and Mitton, T.. “Cronyism and Capital Controls: Evidence from Malaysia.” Journal of Financial Economics, 67 (2003), 351–382.Google Scholar
La Porta, R.; Lopez-de-Silanes, F.; Shleifer, A.; and Vishny, R. W.. “Legal Determinants of External Finance.” Journal of Finance, 52 (1997), 1131–1150.CrossRefGoogle Scholar
La Porta, R.; Lopez-de-Silanes, F.; Shleifer, A.; and Vishny, R. W.. “Law and Finance.” Journal of Political Economy, 106 (1998), 1113–1155.CrossRefGoogle Scholar
La Porta, R.; Lopez-de-Silanes, F.; Shleifer, A.; and Vishny, R.. “The Quality of Government.” Journal of Law, Economics, and Organization, 15 (1999), 222–279.CrossRefGoogle Scholar
La Porta, R.; Lopez-de-Silanes, F.; Shleifer, A.; and Vishny, R.. “Investor Protection and Corporate Valuation.” Journal of Finance, 57 (2002), 1147–1170.CrossRefGoogle Scholar
Levine, R., and Zervos, S.. “Stock Markets, Banks, and Economic Growth.” American Economic Review, 88 (1998), 537–558.Google Scholar
MacKay, P., and Phillips, G. M.. “How Does Industry Affect Firm Financial Structure?” Review of Financial Studies, 18 (2005), 1433–1466.CrossRefGoogle Scholar
Miller, M. H. “Debt and Taxes.” Journal of Finance, 32 (1977), 261–275.Google Scholar
Modigliani, F., and Miller, M. H.. “Corporate Income Taxes and the Cost of Capital: A Correction.” American Economic Review, 53 (1963), 433–443.Google Scholar
Newey, W. K., and West, K. D.. “A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix.” Econometrica, 55 (1987), 703–708.CrossRefGoogle Scholar
Ozkan, A. “An Empirical Analysis of Corporate Debt Maturity Structure.” European Financial Management, 6 (2000), 197–212.CrossRefGoogle Scholar
Petersen, M. A. “Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches.” Review of Financial Studies, 22 (2009), 435–480.CrossRefGoogle Scholar
Petersen, M. A., and Rajan, R. G.. “The Benefits of Lending Relationships: Evidence from Small Business Data.” Journal of Finance, 49 (1994), 3–37.CrossRefGoogle Scholar
Rajan, R. G., and Zingales, L.. “What Do We Know about Capital Structure? Some Evidence from International Data.” Journal of Finance, 50 (1995), 1421–1460.Google Scholar
Rajan, R. G., and Zingales, L.. “Financial Dependence and Growth.” American Economic Review, 88 (1998), 559–586.Google Scholar
Stohs, M. H., and Mauer, D. C.. “The Determinants of Corporate Debt Maturity Structure.” Journal of Business, 69 (1996), 279–312.CrossRefGoogle Scholar
Terra, P. R. S. “Determinants of Corporate Debt Maturity in Latin America.” European Business Review, 23 (2011), 45–70.CrossRefGoogle Scholar
Titman, S. “The Modigliani and Miller Theorem and the Integration of Financial Markets.” Financial Management, 31 (2002), 101–115.Google Scholar
Titman, S., and Wessels, R.. “The Determinants of Capital Structure Choice.” Journal of Finance, 43 (1988), 1–19.Google Scholar
Treisman, D. “The Causes of Corruption: A Cross-National Study.” Journal of Public Economics, 76 (2000), 399–457.CrossRefGoogle Scholar