Judicial efficiency, debt structure, and cost of debt

Abstract

n the framework of law and finance literature, this study investigates the linkbetween judicial efficiency and financial debt cost in 1487 non-financial firms acrossthe euro zone from 2010 to 2021. Utilizing qualitative (rule of law) and quantitative(judicial proceeding length) indicators from the Worldwide Governance Indicatorsand Doing Business databases, our findings support the hypothesis that efficient jus-tice lowers financial debt cost. Additionally, we observe a moderating effect of debtstructure, specifically that private non-bank debt enhances the reduction impact ofjudicial efficiency on debt cost, unlike bank and corporate bonds debt.