The Impact of Financial and Legal Structures on the Performance of European Listed Firms

This study examines the impact of capital structure on the performance of listed firms in the European region by considering different systems of legal protection. Based on 5,050 listed firms in eight European countries, the results of the study reveal that owners in low level of legal investor protection countries are more likely to use the firm’s capital structure to serve their own interests. In the case of high level of legal protection the results indicate that debt is used as a disciplinary tool to constrain the expropriation of private benefits.