Influence of bank concentration and institutions on capital structureNew international evidence

Resumen

This paper uses a panel database of 12,049 firms in 39 countries to analyze how bank market concentration and institutions affect capital structure. Our results show that firm leverage increases with bank concentration and the protection of creditor rights, but decreases with the protection of property rights. Results also indicate that higher bank concentration substitutes for creditor protection and asset tangibility to reduce the agency cost of debt between shareholders and debtholders. Weak protection of property rights increases the agency cost of external funds, leading to the preferential use of internal funds proposed by the Pecking Order Theory. The validity of the Trade-Off Theory, however, increases in countries with better protection of property rights.