Creditor protection, shareholder protection and investment efficiency: New evidence

Prior studies show significant effects of creditor rights and shareholder rights on corporate investment efficiency; however, they have not addressed how shareholder (creditor) rights influence the relationship between creditor (shareholder) rights and firm investment efficiency. With a research sam...

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Bibliographic Details
Published in:The North American journal of economics and finance 2020-04, Vol.52, p.101170, Article 101170
Main Author: Tran, Quoc Trung
Format: Article
Language:English
Subjects:
Creditor protection
Financial crisis
Investment efficiency
Shareholder protection
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Summary:Prior studies show significant effects of creditor rights and shareholder rights on corporate investment efficiency; however, they have not addressed how shareholder (creditor) rights influence the relationship between creditor (shareholder) rights and firm investment efficiency. With a research sample of 235,969 firm-years from 31,152 firms across 42 countries during the period 2002–2016, we find that the negative (positive) effect of creditor (shareholder) rights on corporate investment efficiency is stronger (weaker) in countries of strong shareholder (creditor) protection. In addition, our research findings show that both creditor rights and shareholder rights are less effective in investment efficiency during the global financial crisis. Firms in countries of strong shareholder (creditor) protection experience smaller (larger) decreases in the effectiveness of creditor (shareholder) rights.
ISSN:1062-9408
1879-0860
DOI:10.1016/j.najef.2020.101170