Governance and leverage: International evidence

Governance and leverage: International evidence

In this study, we use board reforms across countries as a natural experiment to examine the effect of governance on firm leverage. We find that board reforms are associated with a statistically significant 1‐percentage‐point increase in leverage overall and a 5‐percentage‐point increase on average f...

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Veröffentlicht in:The Financial review (Buffalo, N.Y.) N.Y.), 2023-05, Vol.58 (2), p.261-285
Hauptverfasser: Driss, Hamdi, El Ghoul, Sadok, Guedhami, Omrane, Wald, John K.
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Sprache:eng
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Board reforms
Corporate governance
Leverage
Shareholders rights
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container_title The Financial review (Buffalo, N.Y.)
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creator Driss, Hamdi
El Ghoul, Sadok
Guedhami, Omrane
Wald, John K.
description In this study, we use board reforms across countries as a natural experiment to examine the effect of governance on firm leverage. We find that board reforms are associated with a statistically significant 1‐percentage‐point increase in leverage overall and a 5‐percentage‐point increase on average for firms that had to make large board changes. These results are robust to a variety of specifications and to controls for potential confounding events. The increase in leverage is also larger for firms in weak shareholder rights countries, suggesting that other shareholder rights can substitute in part for board reforms.
doi_str_mv 10.1111/fire.12321
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source Wiley Online Library Journals Frontfile Complete; Business Source Complete
subjects Board reforms
Corporate governance
Leverage
Shareholders rights
title Governance and leverage: International evidence
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