Leverage and Corporate Performance: Does Institutional Environment Matter?

Leverage and Corporate Performance: Does Institutional Environment Matter? This paper aims to provide new empirical evidence on a major corporate governance issue: the relationship between leverage and corporate performance. We propose two major findings to this literature by applying frontier efficiency techniques to measure performance of medium-sized firms from seven European countries. A maximum likelihood procedure is used to estimate a stochastic cost frontier and the parameters of an equation relating cost inefficiency to leverage simultaneously. We find that the relationship between leverage and corporate performance varies across countries, which tends to support the influence of institutional factors on this link. We then suggest the influence of the efficiency of the legal system and in a lesser degree of the access to bank credit on the relationship between leverage and corporate performance. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Leverage and Corporate Performance: Does Institutional Environment Matter?

Loading next page...
 
/lp/springer_journal/leverage-and-corporate-performance-does-institutional-environment-eCoMyTgKTz
Publisher
Springer US
Copyright
Copyright © 2007 by Springer Science+Business Media, LLC
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-006-9045-7
Publisher site
See Article on Publisher Site

Abstract

This paper aims to provide new empirical evidence on a major corporate governance issue: the relationship between leverage and corporate performance. We propose two major findings to this literature by applying frontier efficiency techniques to measure performance of medium-sized firms from seven European countries. A maximum likelihood procedure is used to estimate a stochastic cost frontier and the parameters of an equation relating cost inefficiency to leverage simultaneously. We find that the relationship between leverage and corporate performance varies across countries, which tends to support the influence of institutional factors on this link. We then suggest the influence of the efficiency of the legal system and in a lesser degree of the access to bank credit on the relationship between leverage and corporate performance.

Journal

Small Business EconomicsSpringer Journals

Published: Apr 17, 2007

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve Freelancer

DeepDyve Pro

Price
FREE
$49/month

$360/year
Save searches from
Google Scholar,
PubMed
Create lists to
organize your research
Export lists, citations
Read DeepDyve articles
Abstract access only
Unlimited access to over
18 million full-text articles
Print
20 pages/month
PDF Discount
20% off