TY - JOUR
T1 - Credit Market Freedom and Corporate Decisions
AU - Iona, Alfonsina
AU - Calef, Andrea
AU - Georgiou, Ifigenia
N1 - Publisher Copyright:
© 2023 by the authors.
PY - 2023/4
Y1 - 2023/4
N2 - In this paper, we investigate whether and to what extent credit market freedom affects a firm’s target level of investment, cash holdings, and leverage. To do so, we generalize the standard empirical models, commonly used in the finance literature to estimate those targets, in order to incorporate credit market freedom into the set of regressors. We estimate three augmented models on a large and heterogeneous sample of North American nonfinancial firms over the period 2000–2019. Our empirical results suggest that greater credit market freedom is associated with a healthier corporate capital structure, higher financial flexibility, and a friendlier investment environment. Our paper contributes to both economic freedom and finance literatures by investigating an unexplored issue in economics and corporate finance research. In addition, it informs policymakers that promoting financial reforms that increase credit market freedom can boost a country’s economic growth.
AB - In this paper, we investigate whether and to what extent credit market freedom affects a firm’s target level of investment, cash holdings, and leverage. To do so, we generalize the standard empirical models, commonly used in the finance literature to estimate those targets, in order to incorporate credit market freedom into the set of regressors. We estimate three augmented models on a large and heterogeneous sample of North American nonfinancial firms over the period 2000–2019. Our empirical results suggest that greater credit market freedom is associated with a healthier corporate capital structure, higher financial flexibility, and a friendlier investment environment. Our paper contributes to both economic freedom and finance literatures by investigating an unexplored issue in economics and corporate finance research. In addition, it informs policymakers that promoting financial reforms that increase credit market freedom can boost a country’s economic growth.
KW - capital structure
KW - corporate decisions
KW - economic freedom
UR - http://www.scopus.com/inward/record.url?scp=85152778810&partnerID=8YFLogxK
U2 - 10.3390/math11071670
DO - 10.3390/math11071670
M3 - Article
AN - SCOPUS:85152778810
SN - 2227-7390
VL - 11
JO - Mathematics
JF - Mathematics
IS - 7
M1 - 1670
ER -