Zero-Leverage Puzzle: An International Comparison

Sadok El Ghoul, Omrane Guedhami, Chuck Kwok, Xiaolan Zheng

Research output: Journal PublicationReview articlepeer-review

48 Citations (Scopus)


Using a large sample of firms from developed and developing countries over the 1990-2010 period, we document evidence of zero-leverage firms around the world. Further, we find strong and robust evidence that in countries with high scores on Schwartz's Conservatism and Mastery indices as well as high levels of trust, firms are more likely to employ a zero-leverage policy, after controlling for various firm- and country-level determinants of leverage. Finally, we find that firms with zero leverage have a lower cost of equity capital in countries where a zero-leverage policy is more compatible with the local culture.

Original languageEnglish
Pages (from-to)1063-1120
Number of pages58
JournalReview of Finance
Issue number3
Publication statusPublished - 1 May 2018
Externally publishedYes


  • Capital structure
  • Debt financing
  • Informal institutions
  • Zero leverage

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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