In this paper, we evaluate firm-, industry- and country-specific factors determining a firm's capital structure. The empirical validity of several capital structure theories has been ambiguous so far. We shed light on the main drivers of leverage and depict differences in industry and country...

This paper studies spillovers across sovereign debt markets in the wake of sovereign rating changes. We compile an extensive dataset covering all announcements by the three major agencies (Standard & Poor's, Moody's, Fitch) and daily sovereign bond market movements of up to 73 developed and...

The Central European countries became members of the European Union (EU) in May 2004. Has their accession into the EU also resulted in a stronger financial integration with the global economy in general and with the "old" EU countries in particular? Based on a cointegration analysis applied to...

We put forward a plausible explanation of African financial under-development in the form of a bad credit market equilibrium. Utilising an appropriately modified IO model of banking, we show that the root of the problem could be unchecked moral hazard (strategic loan defaults) or adverse...

This article examines whether or not the incomes of the poor systematically grow with average incomes, and whether financial development enhances the incomes of the poorest quintile. Following the methodology of Dollar & Kraay (2002), I find once extending Dollar & Kraay's data their findings...

Relational contracts have been shown to mitigate moral hazard in labor and credit markets. A central assumption in most theoretical and experimental studies is that, upon misbehaving, agents can be excluded from their current source of income and have to resort to less attractive outside...

Much of the existing literature on the use of informal credit arrangements such as ROSCAs (Rotating and Credit Saving Associations) theorises the use of such institutions as arising from market failures in the development of formal saving and credit mechanisms. As economic development proceeds,...

Weak institutions are shown to create scope for public banks to play a growth-promoting role, even if such banks are less efficient than private banks.

Utilizing the latest panel cointegration methods we provide new empirical evidence from 18 countries that suggests that the link between finance and growth in Sub-Saharan Africa is ‘broken’. Specifically, our findings suggest that banking system development in this region follows economic...