The effects of sovereign rating and corporate governance on the capital structure of Latin American companies.

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Duterval Jesuka
Fernanda Maciel Peixoto


This study analyzed the effects of sovereign rating and corporate governance (CG) on the capital structure of Latin American companies. A multilevel regression model was used for 823 companies listed on major Latin American stock exchanges over the period 2004-2018. The results showed that firm level is the most responsible factor for the variation in companies’ capital structure, while country level had the greatest influence on the variation in long-term debt. In the absence of CG mechanisms, sovereign rating is one of the factors not controlled by managers that can explain the capital structure of Latin American companies, which reduce their debt levels to protect themselves in the face of their countries’ sovereign rating variations. The results indicated that, despite having an audit committee and keeping independent members on the committee, firms choose to reduce their debt levels to protect themselves against the
constant variations of their countries’ sovereign rating. The results also showed that CG mechanisms do not act in isolation when it comes to reducing agency problems. This research is one of the first studies to provide evidence on the implications of sovereign ratings and CG on the capital structure of firms in Latin America.


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Jesuka, D., & Peixoto, F. M. (2023). The effects of sovereign rating and corporate governance on the capital structure of Latin American companies. Brazilian Administration Review, 20(1), e220027.
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