Effects of institutional quality and the development of the banking system on corporate debt

Tresierra, Alvaro; Reyes, Sergio David

doi:10.1108/jefas-03-2017-0053

Cited by 10 publications

(7 citation statements)

References 43 publications

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“…These method has been used by the majority of studies listed in our literature review above, e.g. Chiuri et al (2002), Francis and Osborne (2012), Karmakar and Mok (2015), Aiyar et al (2016), Ben Naceur et al (2018), Tresierra and Reyes (2018), El Hourani and Mondello (2019), and van Duuren et al (2020). Note that the Fixed Effects method allows taking into consideration the bank-specific effects in the estimations by including individual intercepts for each cross-section.…”

Section: Methodology and Variables Specificationsmentioning

confidence: 99%

“…Particularly, the author found that economic freedom is a major determinant of bank credit flows in all countries regardless of the level of their economic development and a higher economic freedom results in an increase in credit flows. Tresierra and Reyes (2018) aim to determine if the quality of national institutions condition the maturity of corporate debt, by exploiting a sample of 116 nonfinancial companies from Peru and Brazil. The authors show that a stable, democratic, transparent and effective social, legal and economic framework fosters confidence among financial actors, which in turn promotes long-term maturity obligations (i.e.…”

Section: Literature Reviewmentioning

confidence: 99%

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Capital requirements, institutional quality and credit crunch in the MENA region

Awdeh

EL-Moussawi

2021

IJOEM

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PurposeThe introduction of Basel capital adequacy standards (I, II and III) has provoked a large body of empirical and theoretical literature that aimed to detect the consequences of risk-based capital rules on bank lending behaviour and credit availability (and the possible emergence of the credit crunch phenomenon), and came up with divergent conclusions. This study aims at participating in this continuous debate but detecting the applicability of the credit crunch theory in the MENA region, taking into consideration the impact of the institutional environment, which may play a role in mitigating the supply-side credit crunch.Design/methodology/approachThis study exploits the Fixed Effects method on a dataset of 210 banks from 14 MENA countries over the period 1999–2016. The paper exploits the percentage change in bank credit as a dependent variable, capital requirements and three institutional quality variables as explanatory variables, in addition to a set of micro- and macro-economic variables.FindingsThe study finds that the implementation of higher capitalisation ratios does participate in a significant decline in bank credit supply. Additionally, by testing the impact of institutional factors on bank lending, it reveals that good governance and political stability encourage banks to extend credit and soften the credit crunch, while higher level of financial freedom discourages banks from expanding loan supply and even magnifies the decline of credit following tightening capital requirements.Practical implicationsThis paper provides very important insight for MENA policymakers and bank regulators by highlighting the importance of the institutional environment factors in amplifying or softening the effect of higher capital requirements in their economies.Originality/valueIn addition to examining an understudied sample of countries, this paper's originality and value added are represented mainly by testing the impact of institutional environment and governance level on bank lending behaviour.

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Section: Methodology and Variables Specificationsmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Capital requirements, institutional quality and credit crunch in the MENA region

Awdeh

EL-Moussawi

2021

IJOEM

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“…Corruption is considered to be one of the major factors in deteriorating institutional quality of a country, and is also reported to have a significant negative relationship with a wide range of factors impacting small business growth (Krasniqi & Mustafa, 2016). In addition, prior studies further provide evidence on the relationship of corruption control on corporate disclosure, environmental regulations and economic development (Branco & Matos, 2016 Tresierra & Reyes, 2018). Thus, the current study aims to test the moderating effect of corruption control in the context of CSDC, using the following hypothesis;…”

Section: Hypothesis Developmentmentioning

confidence: 97%

“…Krasniqi & Mustafa (2016) used a questionnaire survey of 1,606 of Kosovar entrepreneurs, which empirically showed corruption to be an institutional quality variable that had significant influence on firm growth. More specifically, institutional quality affects the maturity of long-term debt, as was made evident by Tresierra & Reyes (2018) in a study of companies in both Peru and Brazil, which aimed at determining the extent to which national institutions condition the time horizon of debt maturity.…”

Section: Literature Reviewmentioning

confidence: 99%

Moderating Role of Corruption Control on Firm Level Determinants of Corporate Sustainability Disclosure Compliance in Nigeria

Bello¹,

Said²,

Johari³

et al. 2021

EEA

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This paper explores the moderating effect of corruption control in strengthening the influence of firm attributes on corporate sustainability disclosure compliance in Nigeria. The study focuses on the existing discussion on mandatory disclosure compliance with a corporate governance code. The extent of disclosure compliance is measured using a total unweighted disclosure index, developed from a panel data set of 118 companies listed on the Nigerian capital market. The companies were selected using a proportionate stratified sampling technique. The dataset for the period of 2011 to 2017 were first analyzed by static panel regression analysis. The regression models were subjected to further robustness checks under dynamic GMM panel regression analysis, to test for possible endogeneity. The findings revealed the significant moderating effect of corruption control, evidenced from the interaction of corruption control with selected firm attributes, namely; industry type, leverage and taxation. The research contributes to the existing literature, as it establishes the importance of control of corruption as an additional factor of corporate sustainability disclosure compliance within the context of Nigeria.

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“…For investors, these aspects lessen information asymmetry and systemic risk (Roe and Siegel, 2011). Several empirical studies, for instance, Kirch and Terra (2012), Tresierra and Reyes (2018) have found that institutional and financial development is an explicit link that facilitates the leverage by businesses. Additionally, ID may make it easier for businesses to obtain high level of debt on soft terms.…”

Section: Role Of Institutional Environmentmentioning

confidence: 99%

Capital structure and earnings management: evidence from Pakistan

Naz

Sheikh²

2022

IJAIM

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Purpose The purpose of this study is to investigate whether capital structure affects accruals and real earnings management (AEM and REM) of nonfinancial firms listed on Pakistan Stock Exchange (PSX). Moreover, to investigate whether institutional development (ID) moderates the relation between capital structure and earnings management (EM). Design/methodology/approach Data were taken from annual reports of nonfinancial firms listed on the PSX during 2012–2019. Data of 150 firms for a period of eight years were found completed with respect to the variables used in this study. The generalized moments of methods estimator is used to estimate the effects of explanatory variables on earning management. Furthermore, fixed and random effects methods were used to estimate the impact of capital structure on AEM and REM. Findings Results show that all three measures of capital structure (i.e. total debt ratio, long-term debt ratio and short-term debt ratios) are inversely related to AEM. In contrast, all measures of capital structure are positively related to abnormal cash flow from operations. Total debt ratio and long-term debt ratio are negatively while short-term debt ratio is positively related to abnormal discretionary expenses. Total debt ratio and short-term debt ratio are significant and negatively related to abnormal production cost. Additionally, interaction terms of ID (i.e. rule of law and regulatory quality) significantly moderate the controlling role of debt on discretionary accruals. In sum, results show that the use of debt induces lender's monitoring. Consequently, managers move toward REM because of lower probability of being exposed. Practical implications Findings of this study have significant implications for managers and regulatory authorities. For instance, the use of debt increases the lender’s influence which restricts the managers to be involved in EM practices. Moreover, regulatory authorities are required to address the loopholes in regulations to refrain the managers to be engaged in EM. Originality/value To the best of the authors’ knowledge, this is the first study in Pakistan that has explored the impact of capital structure on AEM and REM. More importantly, a careful review of the literature affirms that this study is among the few studies that have used ID as a moderating variable to explain the relation between capital structure and EM.

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Effects of institutional quality and the development of the banking system on corporate debt

Cited by 10 publications

References 43 publications

Capital requirements, institutional quality and credit crunch in the MENA region

Capital requirements, institutional quality and credit crunch in the MENA region

Moderating Role of Corruption Control on Firm Level Determinants of Corporate Sustainability Disclosure Compliance in Nigeria

Capital structure and earnings management: evidence from Pakistan

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