The Impacts Of The Legal Origins On The Corporate Finance Structure

This paper compares the different levels of financial market development in common law and civil law countries with different income levels。We draw hypotheses about the propensity of firms on how to raise money: civil law firms tend to use debt and common law firms tend to use equity.The main variables that have an impact on the structure of corporate finance are income tax,company profitability,company growth,the value of the company’s asset guarantees,industry differences and variables that reflect macro market risk.These variables are used as control variables in this paper.I also collected data about firms in different industries from the Orbis Global Corporate Information Database from 47 countries over the period 2011-2019,yielding a total sample of 90,999.We use a fixed-effects panel model to study the financing structure of firms: when the country changed from common law to civil law,the proportion of debt financing of the firm increased positively by 0.734 and the result was significant at 1%.The proportion of debt financing increases significantly when the firm is in the real estate sector or when it has more collateral assets.The mediating effects of credit legal intensity,credit information depth contract enforcement ease and bankruptcy recovery rate were then tested by stepwise regression and Sober tests,which showed that bankruptcy recovery rate possessed a 54.97 % mediating effect proportion.Robustness tests did not change these findings.