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Impact of Judicial Efficiency on Debt Maturity Structure: Evidence from Judicial Districts of Pakistan

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  • Attaullah Shah

    (Institute of Management Sciences, Peshawar)

Abstract

The debate over =why capital and bond markets remain under-developed in Pakistan‘ is more than two decades old. Several conceptual papers have highlighted causes responsible for the underdevelopment of these markets; however, not enough empirical evidence exists to support the theoretical claims. This paper tries to fill in this gap. Specifically, this paper draws on the recent developments in the area of law and finance to develop several hypotheses related to maturity of corporate debt and judicial efficiency. These hypotheses are tested using data of 370 firms listed at the Karachi Stock Exchange (KSE) and 27 districts high courts of Pakistan over the period 2000 to 2006. Results indicate that corporate debt-maturity decreases with the inefficiency of judiciary. Furthermore, results show that worsening judicial efficiency has greater negative effect on debt-maturity of small firms than on debt-maturity of large firms. Similarly, worsening judicial efficiency negatively affects debt-maturity ratios of firms with fewer tangible assets than debt-maturity ratio of firms with more tangible assets.

Suggested Citation

  • Attaullah Shah, 2011. "Impact of Judicial Efficiency on Debt Maturity Structure: Evidence from Judicial Districts of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 663-682.
  • Handle: RePEc:pid:journl:v:50:y:2011:i:4:p:663-682
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    File URL: http://www.pide.org.pk/pdf/PDR/2011/Volume4/663-682.pdf
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    1. repec:eee:corfin:v:44:y:2017:i:c:p:255-274 is not listed on IDEAS
    2. repec:eee:riibaf:v:42:y:2017:i:c:p:865-873 is not listed on IDEAS
    3. Shah, Hamid Ali & Shah, Attaullah, 2016. "The relationship between judicial efficiency and corporate cash holdings: An international study," Economic Modelling, Elsevier, vol. 59(C), pages 448-462.

    More about this item

    Keywords

    Judicial Efficiency; Debt-maturity; KSE; Capital Market Development; Law and Finance;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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