Influence of bank concentration and institutions on capital structure: New international evidence

By V. Méndez, Francisco Rodríguez. 2008

187 citations recorded by the source corpus.

This paper uses a panel database of 12,049 firms in 39 countries to analyze how bank market concentration and institutions affect capital structure. Our results show that firm leverage increases with bank concentration and the protection of creditor rights, but decreases with the protection of property rights. Results also indicate that higher bank concentration substitutes for creditor protection and asset tangibility to reduce the agency cost of debt between shareholders and debtholders. Weak protection of property rights increases the agency cost of external funds, leading to the preferential use of internal funds proposed by the Pecking Order Theory. The validity of the Trade-Off Theory, however, increases in countries with better protection of property rights.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/9fbba88aff4b8185b6fe7ef6a826c4af61c4de10

How researchers see this paper

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In Accounting

1. Chen Lin
2. Michael Firth
3. Sonia M. L. Wong
4. Gary Gang Tian
5. Xiaofei Pan
6. Qigui Liu
7. Wenxuan Hou
8. Oliver M. Rui

In Finance

1. Michael Firth
2. Sonia M. L. Wong
3. Chen Lin
4. Gary Gang Tian
5. Xiaofei Pan
6. Qigui Liu

Citations in the corpus

• Leverage and investment under a state-owned bank lending environment : evidence from China (2008, background): “Most recently, González and González (2008) show that firm leverage increases with greater bank concentration and stronger protection of creditor rights based on a sample of firms cross 39 countries.”
• Determinants of Corporate Debt Maturity in South America: Do Institutional Quality and Financial Development Matter? (2012, unknown): “…1997), differing ownership structures (La Porta et al., 1998), differing dividend payouts (La Porta et al., 2000a), and differing leverage and debt maturity (Booth et al., 2001; Demirgüç-Kunt and Maksimovic, 1999; Fan et al., 2012; Giannetti, 2003; González and González, 2008; Jong et al., 2008).”
• Firm- and Country-Level Determinants of Corporate Leverage: Some New International Evidence (2011, unknown): “, 2001; Giannetti, 2003; Rajan and Zingales, 1995), proxies employed (cf. Bae and Goyal, 2004; Giannetti, 2003; González and González, 2008; Qian and Strahan, 2007), and model specification.”