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Does a country's Institutional and legal system play a major role in corporate financing decisions? If...

Does a country's Institutional and legal system play a major role in corporate financing decisions? If so how?

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It plays a very important role. Taxation, institutional and legal systems all play a crucial role. Tax treatment of interest, dividend, capital gains determine the capital structure and retention of funds for investment. Also, what are the laws regarding default of payments determine the proportion of debt. Is the institutional system so robust and developed as to allow easy raising of funds determine the equity. The legal handling of liability to be incurred in case of any wrongdoings or default determine the readiness of investors to invest money.

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