Credit market freedom and corporate decisions

Iona, Alfonsina, Calef, Andrea ORCID: https://orcid.org/0000-0002-7045-2622 and Georgiou, Ifigenia (2023) Credit market freedom and corporate decisions. Mathematics, 11 (7). ISSN 2227-7390

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Abstract

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.

Item Type: Article
Additional Information: Data Availability Statement: Company data came from a restricted database, namely Compustat that restricts access to its subscribers, while Economic freedom indices come from Fraser Institute. They are available here: https://www.fraserinstitute.org/economic-freedom/map?geozone=world&year=2020&page=map.
Uncontrolled Keywords: capital structure,corporate decisions,economic freedom,computer science (miscellaneous),engineering (miscellaneous),mathematics(all),sdg 8 - decent work and economic growth ,/dk/atira/pure/subjectarea/asjc/1700/1701
Faculty \ School: Faculty of Social Sciences > School of Economics
UEA Research Groups: Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Faculty of Social Sciences > Research Groups > Applied Econometrics And Finance
Faculty of Social Sciences > Research Groups > Industrial Economics
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Depositing User: LivePure Connector
Date Deposited: 03 Apr 2023 09:30
Last Modified: 02 May 2023 09:30
URI: https://ueaeprints.uea.ac.uk/id/eprint/91709
DOI: 10.3390/math11071670

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