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An International Comparison of Capital Structure and Debt Maturity Choices

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  • Fan, Joseph P. H.
  • Titman, Sheridan
  • Twite, Garry

Abstract

This study examines how the institutional environment influences capital structure and debt maturity choices of firms in 39 developed and developing countries. We find that a country’s legal and tax system, corruption, and the preferences of capital suppliers explain a significant portion of the variation in leverage and debt maturity ratios. Specifically, firms in more corrupt countries and those with weaker laws tend to use more debt, especially short-term debt; explicit bankruptcy codes and deposit insurance are associated with higher leverage and more long-term debt. More debt is used in countries where there is a greater tax gain from leverage.

Suggested Citation

  • Fan, Joseph P. H. & Titman, Sheridan & Twite, Garry, 2012. "An International Comparison of Capital Structure and Debt Maturity Choices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 47(1), pages 23-56, February.
    • Handle: RePEc:cup:jfinqa:v:47:y:2012:i:01:p:23-56_00
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