Corporate Governance and Leverage: Evidence from a Natural Experiment

Tinbergen Institute Discussion Paper 10-019/2

Finance Research Letters, Vol. 7, No. 2, 2010

20 Pages Posted: 7 Feb 2010 Last revised: 30 Jan 2015

See all articles by Stefan Arping

Stefan Arping

University of Amsterdam Business School; Tinbergen Institute

Zacharias Sautner

Frankfurt School of Finance & Management; European Corporate Governance Institute (ECGI)

Date Written: February 4, 2010

Abstract

We argue that the recent corporate governance reform in the Netherlands provides a natural experiment to explore the impact of changes in corporate governance on financing policy. We find that, relative to a control sample of comparable firms outside the Netherlands, Dutch firms significantly reduced their leverage following the passage of the reform. Our findings are consistent with the view that corporate governance improvements reduce the value of debt as a disciplining device.

Keywords: Corporate Governance, Corporate Leverage, Financing Policy

JEL Classification: G32, G34

Suggested Citation

Arping, Stefan and Sautner, Zacharias, Corporate Governance and Leverage: Evidence from a Natural Experiment (February 4, 2010). Tinbergen Institute Discussion Paper 10-019/2, Finance Research Letters, Vol. 7, No. 2, 2010, Available at SSRN: https://ssrn.com/abstract=1548355 or http://dx.doi.org/10.2139/ssrn.1548355

Stefan Arping (Contact Author)

University of Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Zacharias Sautner

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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