Research by financial economists at Maynooth University explores the relationship between stock market liberalizations (investability) and the capital structure of firms. The research synthesises two areas of research, namely the relationships between corporate governance and capital structure, and that between stock market liberalizations and capital structure. Stock market liberalizations refer to instances in which foreign ownership restrictions on domestic corporations are lifted.
The research carried out by Dr. Thomas Flavin and Dr. Thomas O’Connor shows that stock market liberalizations are associated with a lengthening of the maturity structure of corporate capital structures. Single class share firms, which are typically better-governed than their dual-class counterparts, and as a result use more long-term debt, substitute long-term debt for equity upon becoming investable. Dual-class share firms tend to substitute short- for long-term debt. A working paper version of the paper is available here and the paper will be published in the International Review of Finance. Click here to view paper