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Are Firm- And Country-Specific Governance Substitutes? Evidence From Financial Contracts In Emerging Markets

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  • Bill Francis
  • Iftekhar Hasan
  • Liang Song

Abstract

We investigate how borrowers’ corporate governance influences bank loan contracting terms in emerging markets and how this relation varies across countries with different country-level governance. We find that borrowers with stronger corporate governance obtain favorable contracting terms with respect to loan amount, maturity, collateral requirements, and spread. Firm-level and country-level corporate governance are substitutes in writing and enforcing financial contracts. We also find that the distinctiveness of borrowers’ characteristics affect the relation between firm-level corporate governance and loan contracting terms. Our findings are robust, irrespective of types of regression methods and specifications.

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Bibliographic Info

Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

Volume (Year): 35 (2012)
Issue (Month): 3 (09)
Pages: 343-374

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Handle: RePEc:bla:jfnres:v:35:y:2012:i:3:p:343-374

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