Institutional quality and corporate financing decisions around the world
The North American Journal of Economics and Finance, ISSN: 1062-9408, Vol: 57, Page: 101401
2021
- 15Citations
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Citation Benchmarking is provided by Scopus and SciVal and is different from the metrics context provided by PlumX Metrics.
Article Description
We investigate the influence of the recent comprehensive institutional quality dimensions of Karolyi (2015), such as market capacity, operational efficiency, foreign accessibility, corporate transparency, legal protection, and political stability, on financing decisions of firms across 56 countries between 2000 and 2015. We find that stronger institutional quality or lower fundamental risks in a country ease firms' access to long-term debt, and equity financing. We attribute our results to institutional environments influencing financing decisions by shaping the severity of market frictions, such as agency conflicts and information asymmetry, and transaction costs. As a result, we conclude that any improvement in a country's institutional environment will boost firms' access to long-term financing, and thus longer-term investments that promote countries' economic growth will be more feasible. Our findings are robust to potential endogeneity issues.
Bibliographic Details
http://www.sciencedirect.com/science/article/pii/S106294082100036X; http://dx.doi.org/10.1016/j.najef.2021.101401; http://www.scopus.com/inward/record.url?partnerID=HzOxMe3b&scp=85102738998&origin=inward; https://linkinghub.elsevier.com/retrieve/pii/S106294082100036X; https://dx.doi.org/10.1016/j.najef.2021.101401
Elsevier BV
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