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Morais, F., Serrasqueiro, Z. & Ramalho, J. J. S. (2022). The heterogeneous effect of governance mechanisms on zero-leverage phenomenon across financial systems. Corporate Governance. 22 (1), 67-88

F. Morais et al.,  "The heterogeneous effect of governance mechanisms on zero-leverage phenomenon across financial systems", in Corporate Governance, vol. 22, no. 1, pp. 67-88, 2022

@article{morais2022_1732204886455,
	author = "Morais, F. and Serrasqueiro, Z. and Ramalho, J. J. S.",
	title = "The heterogeneous effect of governance mechanisms on zero-leverage phenomenon across financial systems",
	journal = "Corporate Governance",
	year = "2022",
	volume = "22",
	number = "1",
	doi = "10.1108/CG-10-2020-0443",
	pages = "67-88",
	url = "http://www.scopus.com/inward/record.url?eid=2-s2.0-85113599097&partnerID=MN8TOARS"
}

TY  - JOUR
TI  - The heterogeneous effect of governance mechanisms on zero-leverage phenomenon across financial systems
T2  - Corporate Governance
VL  - 22
IS  - 1
AU  - Morais, F.
AU  - Serrasqueiro, Z.
AU  - Ramalho, J. J. S.
PY  - 2022
SP  - 67-88
SN  - 1472-0701
DO  - 10.1108/CG-10-2020-0443
UR  - http://www.scopus.com/inward/record.url?eid=2-s2.0-85113599097&partnerID=MN8TOARS
AB  - Purpose: The purpose of this paper is to investigate whether the effect of country and corporate governance mechanisms on zero leverage is heterogeneous across market- and bank-based financial systems. Design/methodology/approach: Using logit regression methods and a sample of listed firms from 14 Western European countries for the 2002–2016 period, this study examines the propensity of firms having zero leverage in different financial systems. Findings: Country governance mechanisms have a heterogeneous effect on zero leverage, with higher quality mechanisms increasing zero-leverage propensity in bank-based countries and decreasing it in market-based countries. Board dimension and independency have no impact on zero leverage. A higher ownership concentration decreases the propensity for zero-leverage policies in bank-based countries. Research limitations/implications: This study’s findings show the importance of considering both country- and firm-level governance mechanisms when studying the zero-leverage phenomenon and that the effect of those mechanisms vary across financial and legal systems. Practical implications: For managers, this study suggests that stronger national governance makes difficult (favours) zero-leverage policies in market (bank)-based countries. In bank-based countries, it also suggests that the presence of shareholders that own a large stake makes the adoption of zero-leverage policies difficult. This last implication is also important for small shareholders by suggesting that investing in firms with a concentrated ownership reduces the risk that zero-leverage policies are adopted by entrenched reasons. Originality/value: To the best of the authors’ knowledge, this is the first study to consider simultaneously the effects of both country- and firm-level governance mechanisms on zero leverage and to allow such effects to vary across financial systems
ER  -