Economics Department, Columbia University
Institutional Affiliation: International Monetary Fund
NBER Working Papers and Publications
|January 2018||Quality of Public Governance and the Capital Structure of Nations and Firms|
with Shang-Jin Wei: w24184
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.