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Interaction effects of country-level governance quality and debt on stock returns in developing nations

This study examines the moderating effects of country-level governance quality on the relationship between debt and stock returns, using 3,891 firms from 23 developing countries covering the period from 2006 to 2014. Applying the panel generalized method of moments to con...

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Main Authors: Matemilola, Bolaji Tunde, A. N, Bany Ariffin, Md.Nassir, Annuar
Format: Article
Language:English
Published: 2018
Online Access:http://psasir.upm.edu.my/id/eprint/74713/1/Interaction%20effects.pdf
http://psasir.upm.edu.my/id/eprint/74713/
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spelling my.upm.eprints.747132020-03-17T08:13:11Z http://psasir.upm.edu.my/id/eprint/74713/ Interaction effects of country-level governance quality and debt on stock returns in developing nations Matemilola, Bolaji Tunde A. N, Bany Ariffin Md.Nassir, Annuar This study examines the moderating effects of country-level governance quality on the relationship between debt and stock returns, using 3,891 firms from 23 developing countries covering the period from 2006 to 2014. Applying the panel generalized method of moments to control for endogeneity, the findings reveal that country-level governance quality has positive moderating effects on the relationship between book debt and stock returns. Robustness check using market debt show that country-level governance quality has positive moderating effects on the relationship between market debt and stock returns. Additional analysis controls for the financial crisis years and the results are broadly similar, except that the coefficients of some variables change. The results suggest that strong governance quality lowers financial risk which encourage firms to raise debt capital needed to maximize stockholders’ returns. 2018 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/74713/1/Interaction%20effects.pdf Matemilola, Bolaji Tunde and A. N, Bany Ariffin and Md.Nassir, Annuar (2018) Interaction effects of country-level governance quality and debt on stock returns in developing nations. Capital Markets Review, 26 (1). 19 - 35.
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description This study examines the moderating effects of country-level governance quality on the relationship between debt and stock returns, using 3,891 firms from 23 developing countries covering the period from 2006 to 2014. Applying the panel generalized method of moments to control for endogeneity, the findings reveal that country-level governance quality has positive moderating effects on the relationship between book debt and stock returns. Robustness check using market debt show that country-level governance quality has positive moderating effects on the relationship between market debt and stock returns. Additional analysis controls for the financial crisis years and the results are broadly similar, except that the coefficients of some variables change. The results suggest that strong governance quality lowers financial risk which encourage firms to raise debt capital needed to maximize stockholders’ returns.
format Article
author Matemilola, Bolaji Tunde
A. N, Bany Ariffin
Md.Nassir, Annuar
spellingShingle Matemilola, Bolaji Tunde
A. N, Bany Ariffin
Md.Nassir, Annuar
Interaction effects of country-level governance quality and debt on stock returns in developing nations
author_facet Matemilola, Bolaji Tunde
A. N, Bany Ariffin
Md.Nassir, Annuar
author_sort Matemilola, Bolaji Tunde
title Interaction effects of country-level governance quality and debt on stock returns in developing nations
title_short Interaction effects of country-level governance quality and debt on stock returns in developing nations
title_full Interaction effects of country-level governance quality and debt on stock returns in developing nations
title_fullStr Interaction effects of country-level governance quality and debt on stock returns in developing nations
title_full_unstemmed Interaction effects of country-level governance quality and debt on stock returns in developing nations
title_sort interaction effects of country-level governance quality and debt on stock returns in developing nations
publishDate 2018
url http://psasir.upm.edu.my/id/eprint/74713/1/Interaction%20effects.pdf
http://psasir.upm.edu.my/id/eprint/74713/
_version_ 1662756498268225536
score 13.211869

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