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Institutions, banking structure and the cost of debt: new international evidence
Author(s) -
ÁlvarezBotas Celia,
González Víctor M.
Publication year - 2021
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12567
Subject(s) - creditor , enforcement , financial system , debt , business , external debt , senior debt , internal debt , bank regulation , finance , monetary economics , economics , debt to gdp ratio , political science , law
This paper analyses the effect of institutions and the structure of the banking system on the cost of debt for a sample of firms from 37 countries. The cost of debt decreases with the rule of law, the protection of creditors’ rights and the weight of banks in the economy. Bank financing and bank concentration have a positive differential effect on the cost of debt in those countries where the financial difficulties of banks are greater. Legal enforcement, the protection of creditors’ rights and the weight of bank financing have a greater influence in countries with a lower degree of economic development.