Impact of Judicial Efficiency on Debt Maturity Structure: Evidence from Judicial Districts of Pakistan

Pakistan Development Review, 2011, Vol. 50, No. 4, pp. 663-682

22 Pages Posted: 10 Apr 2014

See all articles by Attaullah Shah

Attaullah Shah

Institute of Management Sciences

Date Written: 2011

Abstract

The debate over ‘why capital and bond markets remain under-developed in Pakistan’ is more than two decades old. Several conceptual papers have highlighted causes responsible for the underdevelopment of these markets; however, not enough empirical evidence exists to support the theoretical claims. This paper tries to fill in this gap. Specifically, this paper draws on the recent developments in the area of law and finance to develop several hypotheses related to maturity of corporate debt and judicial efficiency. These hypotheses are tested using data of 370 firms listed at the Karachi Stock Exchange (KSE) and 27 districts high courts of Pakistan over the period 2000 to 2006. Results indicate that corporate debt-maturity decreases with the inefficiency of judiciary. Furthermore, results show that worsening judicial efficiency has greater negative effect on debt-maturity of small firms than on debt-maturity of large firms. Similarly, worsening judicial efficiency negatively affects debt-maturity ratios of firms with fewer tangible assets than debt-maturity ratio of firms with more tangible assets.

Keywords: judicial efficiency, debt-maturity, KSE, capital market development, law and finance

JEL Classification: G10, G21, G32

Suggested Citation

Shah, Attaullah, Impact of Judicial Efficiency on Debt Maturity Structure: Evidence from Judicial Districts of Pakistan (2011). Pakistan Development Review, 2011, Vol. 50, No. 4, pp. 663-682, Available at SSRN: https://ssrn.com/abstract=2423221

Attaullah Shah (Contact Author)

Institute of Management Sciences ( email )

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Peshawar, NWFP 25000
Pakistan
+923459146115 (Phone)

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