NATIONAL BUREAU OF ECONOMIC RESEARCH
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Quality of Public Governance and the Capital Structure of Nations and Firms

Shang-Jin Wei, Jing Zhou

NBER Working Paper No. 24184
Issued in January 2018
NBER Program(s):International Finance and Macroeconomics

This paper examines the role of public governance quality in determining the composition of a country’s external liabilities and the capital structure of firms. In our theory, better institutional quality tends to promote a higher share of foreign direct investment and equity investment in total foreign liabilities, and a higher share of long-term debt within the debt/loan category. Similar prediction holds for the capital structure of firms. We conduct extensive empirical investigation by exploring both firm level data and country level data and find supportive evidence for these predictions.

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Document Object Identifier (DOI): 10.3386/w24184

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