Legal Effectiveness and External Capital : The Role of Foreign Debt

Previous research has documented weak, and sometimes conflicting, effects of legal quality on measures of firm debt. Using WorldScope data for 1,689 firms, as well as more detailed proprietary data for 315 firms across nine East Asian countries, the authors find that access to foreign financing appe...

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Main Authors:	Allayannis, George, Brown, Gregory W., Klapper, Leora F.
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING BANK ACCOUNTS BANK LOANS BANKING SECTOR BANKING SYSTEM BANKRUPTCY BANKS BOOK VALUE BORROWING BORROWING CONSTRAINTS CAPITAL MARKETS CAPITAL STRUCTURE CAPITALIZATION CASH FLOWS COLLATERAL CONTRACT ENFORCEMENT CORPORATE GOVERNANCE CURRENCY DEBT ECONOMIC DEVELOPMENT EMERGING MARKETS EMPIRICAL ANALYSIS EMPIRICAL RESEARCH EMPIRICAL STUDIES EQUILIBRIUM EQUITY CAPITAL EXPENDITURE EXTERNAL FINANCING FINANCIAL DEVELOPMENT FINANCIAL ECONOMICS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL RISK FINANCIAL TRANSACTIONS FISCAL YEAR FIXED ASSETS FOREIGN ASSETS FOREIGN BANKS FOREIGN CURRENCY FORWARD CONTRACTS GAMBLING GDP GDP PER CAPITA GOVERNMENT SUBSIDIES HEDGING INFORMATION ASYMMETRIES INTEGRITY INTEREST RATE INTEREST RATES INTERNATIONAL BANKS INTERNATIONAL FINANCE LAWS LEGAL PROTECTION LIBOR LOCAL CURRENCY LONDON INTERBANK OFFER RATE MARGINS MARKET VALUE MATURITY NET INTEREST MARGIN OIL OWNERSHIP STRUCTURE POLITICAL ECONOMY PROFITABILITY PROPERTY RIGHTS PUBLIC BORROWING QUANTITATIVE ANALYSIS REGRESSION MODELS RELATIVE VALUE SECURED LENDERS SHAREHOLDERS STATE INTERVENTION SUBSIDIARIES TANGIBLE ASSETS TRANSPORT
Online Access:	http://documents.worldbank.org/curated/en/2005/03/5635636/legal-effectiveness-external-capital-role-foreign-debt http://hdl.handle.net/10986/8861

id	okr-10986-8861
recordtype	oai_dc
spelling	okr-10986-88612021-04-23T14:02:42Z Legal Effectiveness and External Capital : The Role of Foreign Debt Allayannis, George Brown, Gregory W. Klapper, Leora F. ACCOUNTING BANK ACCOUNTS BANK LOANS BANKING SECTOR BANKING SYSTEM BANKRUPTCY BANKS BOOK VALUE BORROWING BORROWING CONSTRAINTS CAPITAL MARKETS CAPITAL STRUCTURE CAPITALIZATION CASH FLOWS COLLATERAL CONTRACT ENFORCEMENT CORPORATE GOVERNANCE CURRENCY DEBT ECONOMIC DEVELOPMENT EMERGING MARKETS EMPIRICAL ANALYSIS EMPIRICAL RESEARCH EMPIRICAL STUDIES EQUILIBRIUM EQUITY CAPITAL EXPENDITURE EXTERNAL FINANCING FINANCIAL DEVELOPMENT FINANCIAL ECONOMICS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL RISK FINANCIAL TRANSACTIONS FISCAL YEAR FIXED ASSETS FOREIGN ASSETS FOREIGN BANKS FOREIGN CURRENCY FORWARD CONTRACTS GAMBLING GDP GDP PER CAPITA GOVERNMENT SUBSIDIES HEDGING INFORMATION ASYMMETRIES INTEGRITY INTEREST RATE INTEREST RATES INTERNATIONAL BANKS INTERNATIONAL FINANCE LAWS LEGAL PROTECTION LIBOR LOCAL CURRENCY LONDON INTERBANK OFFER RATE MARGINS MARKET VALUE MATURITY NET INTEREST MARGIN OIL OWNERSHIP STRUCTURE POLITICAL ECONOMY PROFITABILITY PROPERTY RIGHTS PUBLIC BORROWING QUANTITATIVE ANALYSIS REGRESSION MODELS RELATIVE VALUE SECURED LENDERS SHAREHOLDERS STATE INTERVENTION SUBSIDIARIES TANGIBLE ASSETS TRANSPORT Previous research has documented weak, and sometimes conflicting, effects of legal quality on measures of firm debt. Using WorldScope data for 1,689 firms, as well as more detailed proprietary data for 315 firms across nine East Asian countries, the authors find that access to foreign financing appears to loosen borrowing constraints associated with poor legal systems. This helps resolve inconsistencies in prior findings and explains how legal protection is important for borrowing by firms. In particular, they find that legal effectiveness is important for determining the amount, maturity, and currency denomination of debt. The authors discuss several mechanisms by which firms can avoid the costs of poor legal systems with foreign borrowing. The paper contributes to the policy debate surrounding the importance of creditor rights for domestic lending. 2012-06-22T20:16:29Z 2012-06-22T20:16:29Z 2005-03 http://documents.worldbank.org/curated/en/2005/03/5635636/legal-effectiveness-external-capital-role-foreign-debt http://hdl.handle.net/10986/8861 English Policy Research Working Paper; No. 3530 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCOUNTING BANK ACCOUNTS BANK LOANS BANKING SECTOR BANKING SYSTEM BANKRUPTCY BANKS BOOK VALUE BORROWING BORROWING CONSTRAINTS CAPITAL MARKETS CAPITAL STRUCTURE CAPITALIZATION CASH FLOWS COLLATERAL CONTRACT ENFORCEMENT CORPORATE GOVERNANCE CURRENCY DEBT ECONOMIC DEVELOPMENT EMERGING MARKETS EMPIRICAL ANALYSIS EMPIRICAL RESEARCH EMPIRICAL STUDIES EQUILIBRIUM EQUITY CAPITAL EXPENDITURE EXTERNAL FINANCING FINANCIAL DEVELOPMENT FINANCIAL ECONOMICS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL RISK FINANCIAL TRANSACTIONS FISCAL YEAR FIXED ASSETS FOREIGN ASSETS FOREIGN BANKS FOREIGN CURRENCY FORWARD CONTRACTS GAMBLING GDP GDP PER CAPITA GOVERNMENT SUBSIDIES HEDGING INFORMATION ASYMMETRIES INTEGRITY INTEREST RATE INTEREST RATES INTERNATIONAL BANKS INTERNATIONAL FINANCE LAWS LEGAL PROTECTION LIBOR LOCAL CURRENCY LONDON INTERBANK OFFER RATE MARGINS MARKET VALUE MATURITY NET INTEREST MARGIN OIL OWNERSHIP STRUCTURE POLITICAL ECONOMY PROFITABILITY PROPERTY RIGHTS PUBLIC BORROWING QUANTITATIVE ANALYSIS REGRESSION MODELS RELATIVE VALUE SECURED LENDERS SHAREHOLDERS STATE INTERVENTION SUBSIDIARIES TANGIBLE ASSETS TRANSPORT
spellingShingle	ACCOUNTING BANK ACCOUNTS BANK LOANS BANKING SECTOR BANKING SYSTEM BANKRUPTCY BANKS BOOK VALUE BORROWING BORROWING CONSTRAINTS CAPITAL MARKETS CAPITAL STRUCTURE CAPITALIZATION CASH FLOWS COLLATERAL CONTRACT ENFORCEMENT CORPORATE GOVERNANCE CURRENCY DEBT ECONOMIC DEVELOPMENT EMERGING MARKETS EMPIRICAL ANALYSIS EMPIRICAL RESEARCH EMPIRICAL STUDIES EQUILIBRIUM EQUITY CAPITAL EXPENDITURE EXTERNAL FINANCING FINANCIAL DEVELOPMENT FINANCIAL ECONOMICS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL RISK FINANCIAL TRANSACTIONS FISCAL YEAR FIXED ASSETS FOREIGN ASSETS FOREIGN BANKS FOREIGN CURRENCY FORWARD CONTRACTS GAMBLING GDP GDP PER CAPITA GOVERNMENT SUBSIDIES HEDGING INFORMATION ASYMMETRIES INTEGRITY INTEREST RATE INTEREST RATES INTERNATIONAL BANKS INTERNATIONAL FINANCE LAWS LEGAL PROTECTION LIBOR LOCAL CURRENCY LONDON INTERBANK OFFER RATE MARGINS MARKET VALUE MATURITY NET INTEREST MARGIN OIL OWNERSHIP STRUCTURE POLITICAL ECONOMY PROFITABILITY PROPERTY RIGHTS PUBLIC BORROWING QUANTITATIVE ANALYSIS REGRESSION MODELS RELATIVE VALUE SECURED LENDERS SHAREHOLDERS STATE INTERVENTION SUBSIDIARIES TANGIBLE ASSETS TRANSPORT Allayannis, George Brown, Gregory W. Klapper, Leora F. Legal Effectiveness and External Capital : The Role of Foreign Debt
relation	Policy Research Working Paper; No. 3530
description	Previous research has documented weak, and sometimes conflicting, effects of legal quality on measures of firm debt. Using WorldScope data for 1,689 firms, as well as more detailed proprietary data for 315 firms across nine East Asian countries, the authors find that access to foreign financing appears to loosen borrowing constraints associated with poor legal systems. This helps resolve inconsistencies in prior findings and explains how legal protection is important for borrowing by firms. In particular, they find that legal effectiveness is important for determining the amount, maturity, and currency denomination of debt. The authors discuss several mechanisms by which firms can avoid the costs of poor legal systems with foreign borrowing. The paper contributes to the policy debate surrounding the importance of creditor rights for domestic lending.
format	Publications & Research :: Policy Research Working Paper
author	Allayannis, George Brown, Gregory W. Klapper, Leora F.
author_facet	Allayannis, George Brown, Gregory W. Klapper, Leora F.
author_sort	Allayannis, George
title	Legal Effectiveness and External Capital : The Role of Foreign Debt
title_short	Legal Effectiveness and External Capital : The Role of Foreign Debt
title_full	Legal Effectiveness and External Capital : The Role of Foreign Debt
title_fullStr	Legal Effectiveness and External Capital : The Role of Foreign Debt
title_full_unstemmed	Legal Effectiveness and External Capital : The Role of Foreign Debt
title_sort	legal effectiveness and external capital : the role of foreign debt
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2005/03/5635636/legal-effectiveness-external-capital-role-foreign-debt http://hdl.handle.net/10986/8861
_version_	1764407028492533760

Legal Effectiveness and External Capital : The Role of Foreign Debt

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