Financial Leverage and Debt Maturity Targeting : International Evidence

We provide evidence on leverage and debt maturity targeting in a large international setting. There are key differences in the relative importance of institutional factors in explaining actual as opposed to target capital structures. Targets and target deviations are plausibly influenced by the institutional environment. Firms from countries with strong institutions target lower leverage and higher long-term debt, whereas a financial structure based on the effectiveness of capital markets and better-functioning financial systems result in lower target leverage and lower long-term debt. Financial crisis has led to more prevalent target deviations. Better institutions significantly decrease the likelihood of target deviations