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Banking Regulation, Institutional Framework and Capital Structure: International Evidence from Industry Data

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Abstract

This paper uses an industry data set from the European Union, United States and Japan to investigate the degree to which banking regulation and institutional environment affects corporate finance choices. La Porta et al. (1997, 1998) have shown the influence of investor protection on financing decisions. We extend these measures of investor protection and develop a measure for banking regulation. We both confirm prior findings and provide additional evidence of "institutional effects". We find that prudential banking regulation is positively associated with industry indebtedness, indicating that prudential rules make it easier for firms to access to credit market. Furthermore, we also find that disclosure rules affect leverage decisions.

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Bibliographic Info

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 111.

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Date of creation: 01 Nov 2003
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Publication status: Published in The Quarterly Review of Economics and Finance, 2007, 47, (4), pages 481-506
Handle: RePEc:sef:csefwp:111

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Keywords: banking regulation; investor protection; capital structure;

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Cited by:
  1. Maurizio La Rocca & Tiziana La Rocca & Alfio Cariola, 2011. "Capital Structure Decisions During a Firm's Life Cycle," Small Business Economics, Springer, vol. 37(1), pages 107-130, July.

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