The study analyzed the relationship between creditor protection and a firm use of debt. The author predicted that there is a negative relationship between creditor protection and firm leverage. This is because increase creditor protection reduces the attractiveness of debt financing reducing the demand of debt and consequently firm leverage. Managers would be afraid of losing control in case of strong creditor protection. In addition, it increases the risk of bankruptcy in case the firm faces financial distress. The article does not provide detailed theoretical backing of the objectives of the study and its predictions.
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