Journal of Financial and Quantitative Analysis

Research Articles

An International Comparison of Capital Structure and Debt Maturity Choices

Joseph P. H. Fana1, Sheridan Titmana2 and Garry Twitea3

a1 Faculty of Business Administration, Chinese University of Hong Kong, Shatin, NT, Hong Kong.

a2 McCombs School of Business, University of Texas at Austin, 1 University Station, Austin, TX 78712.

a3 School of Finance and Applied Statistics, Australian National University, Canberra, ACT 0200, Australia.


This study examines how the institutional environment influences capital structure and debt maturity choices of firms in 39 developed and developing countries. We find that a country’s legal and tax system, corruption, and the preferences of capital suppliers explain a significant portion of the variation in leverage and debt maturity ratios. Specifically, firms in more corrupt countries and those with weaker laws tend to use more debt, especially short-term debt; explicit bankruptcy codes and deposit insurance are associated with higher leverage and more long-term debt. More debt is used in countries where there is a greater tax gain from leverage.

(Online publication December 01 2011)


This paper has benefited from the useful comments and suggestions provided by Andres Almazan, Heitor Almeida, Lawrence Booth, Stijn Claessens, Joshua Coval, Sudipto Dasgupta, Jay Hartzell, Jiang Luo, Vojislav Maksimovic, Paul Malatesta (the editor), Ronald Masulis (associate editor and referee), Enrico Perotti, Tom Smith, and participants at the 2003 European Finance Association Conference, the 2003 Financial Management Association Conference, and the 2005 American Finance Association Meeting, as well as seminar participants at the Australian National University, Australian Graduate School of Management, Chinese University of Hong Kong, Hong Kong University of Science and Technology, Shanghai University of Finance and Economics, University of Melbourne, University of Queensland, University of Sydney, and University of Texas at Austin. Fan is grateful for financial support from the Research Grants Council of the Hong Kong Special Administrative Region, China (Project No. CUHK6230/03H) and the University of Queensland for research support during his visit where part of the research was carried out. Twite is grateful for financial support from the Australian Research Council Discovery Project (ID DP0664505).