In research, there has been conflicting theory and evidence about the relation between creditor rights and corporate leverage. On the one hand, the supply-side view states that stronger creditor rights lead to an increased supply of credit and hence, corporate leverage increases. On the other hand, the demand-side view shows that in response to better protected creditors, managers choose to follow low-risk strategies and reduce leverage. The goal of this thesis is to develop a better understanding of the relation between creditor rights and corporate leverage. This work contributes to this stream of literature by using a large sample including 508,376 firm-years from 46,481 unique firms located in 55 countries from 1980 to 2017. The results of this thesis show that demand-side forces dominate supply-side forces as stronger creditor rights lead to a reduction of corporate leverage. Moreover, a crises variable is added as a moderator to investigate how firms change their response to creditor rights during crises. However, the results for this interaction are insignificant and hence, firms do not seem to adopt their leverage levels in response to creditor rights during crises compared to normal times.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:uu-406025 |
| Date | January 2019 |
| Creators | Maier, Tobias |
| Publisher | Uppsala universitet, Företagsekonomiska institutionen |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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