Corporate Governance and Leverage: Evidence from a Natural Experiment
Tinbergen Institute Discussion Paper 10-019/2
Finance Research Letters, Vol. 7, No. 2, 2010
20 Pages Posted: 7 Feb 2010 Last revised: 30 Jan 2015
Date Written: February 4, 2010
Abstract
We argue that the recent corporate governance reform in the Netherlands provides a natural experiment to explore the impact of changes in corporate governance on financing policy. We find that, relative to a control sample of comparable firms outside the Netherlands, Dutch firms significantly reduced their leverage following the passage of the reform. Our findings are consistent with the view that corporate governance improvements reduce the value of debt as a disciplining device.
Keywords: Corporate Governance, Corporate Leverage, Financing Policy
JEL Classification: G32, G34
Suggested Citation: Suggested Citation
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