Labor protection and corporate Debt maturity: International evidence |
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| Institution: | 1. UAE University, College of Business & Economics, United Arab Emirates;2. College of Business Administration, King Saud University, Saudi Arabia;3. Department of Finance, Audit and Accounting Champagne School of Management (Groupe ESC Troyes), France IRG, Université Paris Est Créteil, France;1. Department of Finance, School of Business, Quinnipiac University, Hamden, CT 06518, United States;2. HSBC Business School, Peking University, Shenzhen, China;1. Carlson School of Management, University of Minnesota, Minneapolis, MN55455, United States;2. School of Economics and Management, Tsinghua University, Beijing 100084, China;1. Carson College of Business, Washington State University, United States;2. Eller College of Management, The University of Arizona, United States;3. Department of Finance, School of Economics & Wang Yanan Institute for Studies in Economics (WISE), Xiamen University, China |
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| Abstract: | This paper investigates the impact of labor protection on corporate debt maturity structure. We hypothesize that stronger labor protection is conducive to a greater use of short-term debt maturity by firms. Using various country-level indicators as measures of labor protection, and a sample of 114,594 firm-years from 43 countries over the 1990–2010 period, we document robust evidence that firms located in countries where labor enjoys a strong protection tend to borrow more short-term. Our analysis suggests that labor protection is an important institutional factor that plays a role in determining the maturity structure of corporate debt over-and-above economic, legal, and political factors identified in prior research. |
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