Debt enforcement and the cost of debt financing in M&amp;As

Liang, Qing; Li, Zhaohua

doi:10.1016/j.frl.2021.102620

Cited by 5 publications

(3 citation statements)

References 33 publications

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“…For example, higher levels of creditor protection provide them with greater power in situations of liquidation or bankruptcy [24]. With this, they have greater power to force payment of the debt, receive the assets that have been u sed a s collateral, and take control of the firm in the event of bankruptcy.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

“…Breuer, et al [17] Samargandi and Kutan [16] La Porta, et al [1] Liang and Li [24] Shareholder protection Mandatory dividends…”

Section: Samargandi and Kutan [16]mentioning

confidence: 99%

“…𝐿𝑒𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑡 = 𝛽 0 + 𝛼Χ + 𝛾𝑊 + 𝛽 Subscripts i, c, and t represent firm i in country c in period t. The interactions of the tangibility variable with the dummies of the quadrants according to the level of investor protection were necessary because, in countries with high protection of creditor rights, the enforcement of laws is higher [24], and it is possible that the level of indebtedness depends more on tangible assets. Similarly, in countries with low creditor protection, a high value of tangible asset s may not have much influence on the leverage level.…”

Section: Modelmentioning

confidence: 99%

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External governance mechanisms and capital structure: A cross-country analysis

Ahmad,

Khan

2023

ijirss

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This paper seeks to examine how external governance mechanisms related to shareholder protection and creditor rights affect the choice of corporate leverage. The main objective of the study is to examine the relationship between country-level investor protection and the choice of capital structure at the firm level. The sample includes 7490 companies from 40 countries. Data were collected from all publicly listed companies between the years 2013 and 2022, listed in the Van Dijk ORBIS Bureau, based on the fiscal year 2022. This paper opts for the panel data methodology. The results suggest that companies leverage themselves consistently with the Pecking Order Theory. It was observed that the mechanisms associated with the protection of both classes of investors (i.e., shareholders and creditors) significantly influence the capital structure of the companies. The results were robust to several variations in the model studied and indicate that greater investor protection makes firms less likely to use third-party capital. The opposition of insiders (executives and majority shareholders) to debt’s moderating role at their managerial discretion may be the driving force behind this. The differential of the study lies in the distinction between the mechanisms that affect the protection of minority shareholders and those that affect the rights of creditors.

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Section: Theoretical Frameworkmentioning

confidence: 99%

“…Breuer, et al [17] Samargandi and Kutan [16] La Porta, et al [1] Liang and Li [24] Shareholder protection Mandatory dividends…”

Section: Samargandi and Kutan [16]mentioning

confidence: 99%

Section: Modelmentioning

confidence: 99%

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