Impact of Judicial Efficiency on Debt Maturity Structure: Evidence from Judicial Districts of Pakistan.

Attaullah Shah

Abstract


The debate over =why capital and bond markets remain
under-developed in Pakistan‘ is more than two decades old. Several
conceptual papers have highlighted causes responsible for the
underdevelopment of these markets; however, not enough empirical
evidence exists to support the theoretical claims. This paper tries to
fill in this gap. Specifically, this paper draws on the recent
developments in the area of law and finance to develop several
hypotheses related to maturity of corporate debt and judicial
efficiency. These hypotheses are tested using data of 370 firms listed
at the Karachi Stock Exchange (KSE) and 27 districts high courts of
Pakistan over the period 2000 to 2006. Results indicate that corporate
debt-maturity decreases with the inefficiency of judiciary. Furthermore,
results show that worsening judicial efficiency has greater negative
effect on debt-maturity of small firms than on debt-maturity of large
firms. Similarly, worsening judicial efficiency negatively affects
debt-maturity ratios of firms with fewer tangible assets than
debt-maturity ratio of firms with more tangible assets. JEL
classification: G10, G21, G32 Keywords: Judicial Efficiency,
Debt-maturity, KSE, Capital Market Development, Law and
Finance

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DOI: https://doi.org/10.30541/v50i4IIpp.663-682

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