The capital maintenance regime matters for creditors
Relying on an unbalanced panel of 25,211 observations of Polish unlisted companies for the period 2005–2018, we employ panel data analysis to investigate the role of the capital maintenance principle in securing creditors' interests. We document a persistently higher level of indebtedness among...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2023-07-01
|
| Series: | Borsa Istanbul Review |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2214845023000649 |
| _version_ | 1797774847300861952 |
|---|---|
| author | Tadeusz Dudycz Paweł Mielcarz |
| author_facet | Tadeusz Dudycz Paweł Mielcarz |
| author_sort | Tadeusz Dudycz |
| collection | DOAJ |
| description | Relying on an unbalanced panel of 25,211 observations of Polish unlisted companies for the period 2005–2018, we employ panel data analysis to investigate the role of the capital maintenance principle in securing creditors' interests. We document a persistently higher level of indebtedness among firms that adhere to the capital maintenance regime. Although the strength of the relationship is contingent on debt maturity, capital maintenance is found to be significant for both adjusting creditors, who can adjust the terms of the loan contract correspondingly to the credit risk and non-adjusting creditors. Unlimited liability is shown to eliminate the need to maintain legal capital, thus demonstrating the notable role of legal capital in safeguarding creditors’ interests in cooperation with limited liability companies. In contrast to the viewpoint of advocates for abandoning legal capital requirements, we show that legal capital remains an important mechanism for ensuring compatibility in incentives between shareholders and creditors. |
| first_indexed | 2024-03-12T22:27:10Z |
| format | Article |
| id | doaj.art-df2c80fc06b34165873fb3b0504ce1b7 |
| institution | Directory Open Access Journal |
| issn | 2214-8450 |
| language | English |
| last_indexed | 2024-03-12T22:27:10Z |
| publishDate | 2023-07-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Borsa Istanbul Review |
| spelling | doaj.art-df2c80fc06b34165873fb3b0504ce1b72023-07-22T04:52:08ZengElsevierBorsa Istanbul Review2214-84502023-07-01234980999The capital maintenance regime matters for creditorsTadeusz Dudycz0Paweł Mielcarz1Faculty of Management, Wroclaw University of Science and Technology, Poland; Corresponding author. Wrocław University of Science and Technology, Faculty of Management, Wyb. Wyspiańskiego 27, 50-370, Wrocław, Poland.Department of Finance, Kozminski University, Poland; Corresponding author. Kozminski University, Department of Finance, ul. Jagiellońska 57/59, 03-301, Warszawa, Poland.Relying on an unbalanced panel of 25,211 observations of Polish unlisted companies for the period 2005–2018, we employ panel data analysis to investigate the role of the capital maintenance principle in securing creditors' interests. We document a persistently higher level of indebtedness among firms that adhere to the capital maintenance regime. Although the strength of the relationship is contingent on debt maturity, capital maintenance is found to be significant for both adjusting creditors, who can adjust the terms of the loan contract correspondingly to the credit risk and non-adjusting creditors. Unlimited liability is shown to eliminate the need to maintain legal capital, thus demonstrating the notable role of legal capital in safeguarding creditors’ interests in cooperation with limited liability companies. In contrast to the viewpoint of advocates for abandoning legal capital requirements, we show that legal capital remains an important mechanism for ensuring compatibility in incentives between shareholders and creditors.http://www.sciencedirect.com/science/article/pii/S2214845023000649G21G30G32K22 |
| spellingShingle | Tadeusz Dudycz Paweł Mielcarz The capital maintenance regime matters for creditors Borsa Istanbul Review G21 G30 G32 K22 |
| title | The capital maintenance regime matters for creditors |
| title_full | The capital maintenance regime matters for creditors |
| title_fullStr | The capital maintenance regime matters for creditors |
| title_full_unstemmed | The capital maintenance regime matters for creditors |
| title_short | The capital maintenance regime matters for creditors |
| title_sort | capital maintenance regime matters for creditors |
| topic | G21 G30 G32 K22 |
| url | http://www.sciencedirect.com/science/article/pii/S2214845023000649 |
| work_keys_str_mv | AT tadeuszdudycz thecapitalmaintenanceregimemattersforcreditors AT pawełmielcarz thecapitalmaintenanceregimemattersforcreditors AT tadeuszdudycz capitalmaintenanceregimemattersforcreditors AT pawełmielcarz capitalmaintenanceregimemattersforcreditors |