Corruption and capital structure in emerging markets: A panel quantile regression approach

Our study investigates corruption and its effects on capital structure in 16 emerging markets using panel quantile regression method. Using a data of 4236 firms during 2002–2015, we find a heterogeneous relationship between corruption and leverage across quantiles. The relationship between corruption and leverage is positive and significant, except at the 10th quantile, with the effects being strongest at the higher quantiles. The results also hold in various robustness checks. Overall, the result indicates that firms prefer debt financing in order to safeguard its assets from getting appropriated.