The impact of corporate governance quality on capital structure choices: does national governance quality matter?

This research investigates the moderating effect of national governance quality on corporate governance—capital structure decision relationship. Using an instrumental variable estimation technique to analyze a multinational dataset containing 23,142 firm-year observations 3,270 firms in 59 economies from 2004 2014, we find evidence for role quality. Specifically, well-functioning firm-level system tends force managers increase borrowing toward optimal level shareholders. The strength force, however, seems decrease as increases. Our findings suggest that transparent and investor-friendly business environment created by government may complement mechanism reducing agency problems, thus need use leverage tool discipline managers. results are robust different proxies quality, firm leverage.