Open AccessImpact of Judicial Efficiency on Debt Maturity Structure: Evidence from Judicial Districts of Pakistan.
Author(s) -
Attaullah Shah
Publication year - 2011
Publication title -
pakistan development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.154
H-Index - 26
ISSN - 0030-9729
DOI - 10.30541/v50i4iipp.663-682
Subject(s) - maturity (psychological) , inefficiency , underdevelopment , debt , stock exchange , economics , capital market , monetary economics , business , financial system , finance , law , market economy , political science , economic growth
The debate over =why capital and bond markets remainunder-developed in Pakistan‘ is more than two decades old. Severalconceptual papers have highlighted causes responsible for theunderdevelopment of these markets; however, not enough empiricalevidence exists to support the theoretical claims. This paper tries tofill in this gap. Specifically, this paper draws on the recentdevelopments in the area of law and finance to develop severalhypotheses related to maturity of corporate debt and judicialefficiency. These hypotheses are tested using data of 370 firms listedat the Karachi Stock Exchange (KSE) and 27 districts high courts ofPakistan over the period 2000 to 2006. Results indicate that corporatedebt-maturity decreases with the inefficiency of judiciary. Furthermore,results show that worsening judicial efficiency has greater negativeeffect on debt-maturity of small firms than on debt-maturity of largefirms. Similarly, worsening judicial efficiency negatively affectsdebt-maturity ratios of firms with fewer tangible assets thandebt-maturity ratio of firms with more tangible assets. JELclassification: G10, G21, G32 Keywords: Judicial Efficiency,Debt-maturity, KSE, Capital Market Development, Law andFinance