Legal Systems and the Determinants of Corporate Leverage: International Evidence

Willian Campos Borges, Tabajara Pimenta Junior, Luiz Eduardo Gaio, Marcelo Augusto Ambrozini

Abstract


The main objective to be achieved with this study was the determination of relevant variables for the definition of companies leverage level, considering the origin of the legal systems of the countries in which they operate (Civil Law and Common Law). This approach is innovative to the literature on the subject. Relying on a sample space of 26,715 companies from 48 different countries grouped based on the source of their legal systems, and data for the period between the years 2002 and 2013, multiple regressions on panel data were estimated, considering 22 variables (business, legal, and economic). The results suggest that the determinants of the level of leverage of the companies vary according to the legal tradition; that the importance of the variables is not homogeneous across countries; that the specific factors of the economic environment of the countries have an important role in determining the level of leverage of the companies, as well as the legal protection factors (rights of creditors and shareholders).


Keywords


Capital structure; Financial Leverage; Legal Systems; International Finance

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DOI: https://doi.org/10.18256/2237-7956.2018.v8i2.2665

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