Working Paper: NBER ID: w4875
Authors: Raghuram G. Rajan; Luigi Zingales
Abstract: We investigate the determinants of capital structure choice by analyzing the financing decisions of public firms in the major industrialized countries. At an aggregate level, firm leverage is fairly similar across the G-7 countries. We find that factors identified by previous studies as correlated in the cross-section with firm leverage in the United States, are similarly correlated in other countries as well. However, a deeper examination of the U.S. and foreign evidence suggests that the theoretical underpinnings of the observed correlations are still largely unresolved.
Keywords: capital structure; international data; corporate finance
JEL Codes: G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Institutional structures (e.g., tax codes, bankruptcy laws) (D47) | Capital structure choices in G7 countries (G32) |
| Firm size (L25) | Leverage (G32) |
| Bankruptcy code in Germany (G33) | Leverage (G32) |
| Institutional differences (D02) | Aggregate differences in capital structure (G32) |
| Leverage (G32) | Factors like firm size and profitability (L25) |