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ARE FIRM‐ AND COUNTRY‐SPECIFIC GOVERNANCE SUBSTITUTES? EVIDENCE FROM FINANCIAL CONTRACTS IN EMERGING MARKETS
Author(s) -
Francis Bill,
Hasan Iftekhar,
Song Liang
Publication year - 2012
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.2012.01320.x
Subject(s) - corporate governance , loan , optimal distinctiveness theory , business , collateral , maturity (psychological) , emerging markets , financial system , monetary economics , accounting , economics , finance , psychology , developmental psychology , psychotherapist
We investigate how borrowers’ corporate governance influences bank loan contracting terms in emerging markets and how this relation varies across countries with different country‐level governance. We find that borrowers with stronger corporate governance obtain favorable contracting terms with respect to loan amount, maturity, collateral requirements, and spread. Firm‐level and country‐level corporate governance are substitutes in writing and enforcing financial contracts. We also find that the distinctiveness of borrowers’ characteristics affect the relation between firm‐level corporate governance and loan contracting terms. Our findings are robust, irrespective of types of regression methods and specifications.