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Purpose – This study aims to analyse the effect of borrower’s country on syndicated loan spreads, featuring countries according to institutional factors, namely financial systems and corporate governance systems. Design/methodology/approach – This study is an empirical investigation based on a unique sample of more than 85,000 syndicated loans from 122 countries. The paper uses standard and 2LS regression analysis to test whether types of financial and corporate governance systems affect loan spreads. Findings – The paper finds that borrowers from countries with financial systems oriented towards the banking-based paradigm pay lower interest rate spreads than those from countries with financial systems oriented towards the market-based paradigm. There is evidence that borrowers from countries with more developed financial systems pay lower spreads. The results also evidence that borrowers from countries with an Anglo-Saxon governance system pay higher spreads than borrowers from countries with a Continental governance system. Originality - The paper highlights the impact of institutional factors on the cost of financing characterizing the countries according to the type of financial system and the type of corporate governance system. The study finds that borrowers from countries with bank-based financial systems pay lower interest rates spreads compared to those from countries with market-based financial systems. The paper also highlights how the level of financial development affects the cost of financing. The paper also focuses on non-financial firms, unlike financial firms which have been the focus of several empirical studies on topics relating to the cost of financing and corporate governance. Research limitations/implications – This study does not consider potential promiscuous relationships, that can arise at the level of ownership structure and governance, between banks and borrowers, that may affect loan spreads. Practical implications – This study suggests that borrower’s financial and corporate governance systems are important factors in the financial intermediation process. The evidence suggests that corporates with higher potential agency cost and higher potential information asymmetry relatively to external loans providers are requested to pay higher spreads. Therefore, the opportunities to such corporates invest optimally tend to be scarcer. info:eu-repo/semantics/draft

The institutional environment of the company’s country is reflected in its choices between different sources of financing. Given the fact that different countries have diverse specific characteristics, this work proposes to investigate how the financial, governance and legal systems of the borrower’s country of origin influence the costs of financing. Using a sample of syndicated loans with 85,220 tranches, corresponding to 50,658 loans by 25,511 non-financial borrowers from 122 countries, over the period between 2000 and 2012, we find evidence that borrowers pay lower spreads when they come from countries with a bank-based financial system, a continental governance system and when the legal system is common law. By splitting the sample according to the level of risk, we show that for borrowers with an investment grade rating, the type of legal system is irrelevant, whereas for those borrowers with junk ratings no type of system is relevant in determining spreads. When borrowers are junk or unrated, the lenders tend to perform a careful analysis of the company’s financial situation and award higher spreads in countries where the legal system is civil or socialist law. Our results suggest that the borrower country’s financial, governance and legal systems are relevant in determining syndicated loan spreads. info:eu-repo/semantics/draft

Resumo Este estudo visa a identificar como mecanismos de controle externo e interno da governança corporativa, tipicamente considerados no setor empresarial privado, são aplicados ou transformados para o setor público nas empresas estatais. A partir de uma revisão do problema de agência e dos mecanismos propostos para sua mitigação no contexto empresarial, este estudo analisa a situação da governança das empresas estatais no Brasil e em Portugal, com vistas a comparar as soluções adotadas nos dois países e as necessidades de desenvolvimento. Além de compartilhar histórias e fundamentos culturais comuns, esses países são caracterizados como ambientes de pouca segurança aos investidores e fragilidade de instrumentos de solução de litígios, por estruturas de propriedade concentradas e por mercados de capitais ainda insuficientes para pressionar o comportamento das empresas, condições que fragilizam os mecanismos de mercado de controle externo e amplificam a influência das peculiaridades das questões internas de governança das estatais. As análises apontam significativas evoluções recentes nas práticas de governança das estatais, mas identificam desafios que ainda precisam ser direcionados. Resumen Este estudio pretende identificar cómo los mecanismos de control externo e interno de la gobernanza corporativa, típicamente considerados en el sector empresarial privado, son aplicados o transformados al sector público en las empresas estatales. A partir de una revisión del problema de agencia y de los mecanismos propuestos para su mitigación en el contexto empresarial, el estudio analiza la situación de la gobernanza de las empresas estatales en Brasil y Portugal, con miras a comparar las soluciones adoptadas en los dos países y las necesidades de desarrollo. Además de compartir historias y fundamentos culturales comunes, estos países se caracterizan por un ambiente de poca seguridad a los inversores y fragilidad de instrumentos de solución de litigios, por estructuras de propiedad concentradas, y por mercados de capitales aún insuficientes para presionar el comportamiento de las empresas, condiciones que debilitan la efectividad de los mecanismos de mercado de control externo y amplifican la influencia de las peculiaridades de las cuestiones internas de gobernanza de las estatales. Los análisis apuntan significativas evoluciones recientes en las prácticas de gobernanza de las estatales, pero identifican desafíos que aún deben ser dirigidos. Abstract This study aims to identify how external and internal control mechanisms of corporate governance, typically used in the private business sector, are applied or transformed for the public sector in state-owned enterprises (SOEs). Based on a review of the agency problem and the mechanisms proposed for its mitigation in the business context, the study analyzes the governance situation of SOEs in Brazil and Portugal, with a view to comparing the solutions adopted in the two countries and the needs for development. In addition to sharing common history and cultural foundations, these countries are characterized by a low investor security environment and fragility of dispute settlement mechanisms; by concentrated ownership structures; and by capital markets still insufficient to pressure corporate behavior, conditions which weaken the market mechanisms of external control and amplify the influence of the peculiarities of SOEs’ internal governance issues. The analyses point to significant recent advances in SOEs’ governance practices, but identify challenges yet to be addressed.

The institutional environment of the company’s country is reflected in its choices between different sources of financing. Given the fact that different countries have diverse specific characteristics, this work proposes to investigate how the financial, governance and legal systems of the borrower’s country of origin influence the costs of financing. Using a sample of syndicated loans with 85,220 tranches, corresponding to 50,658 loans by 25,511 non-financial borrowers from 122 countries, over the period between 2000 and 2012, we find evidence that borrowers pay lower spreads when they come from countries with a bank-based financial system, a continental governance system and when the legal system is common law. By splitting the sample according to the level of risk, we show that for borrowers with an investment grade rating, the type of legal system is irrelevant, whereas for those borrowers with junk ratings no type of system is relevant in determining spreads. When borrowers are junk or unrated, the lenders tend to perform a careful analysis of the company’s financial situation and award higher spreads in countries where the legal system is civil or socialist law. Our results suggest that the borrower country’s financial, governance and legal systems are relevant in determining syndicated loan spreads. info:eu-repo/semantics/publishedVersion

In this paper, using a unique database, we compare the performance of a set of equity mutual funds to a set of equity savings funds, which are similar to equity mutual funds in all but one characteristic: the tax regime that strongly penalizes withdrawals from equity savings funds. We found evidence consistent with the hypothesis that mutual funds less subject to liquidity shocks exhibit higher performances.