This dissertation studies the impact of judicial efficiency on leverage and debt-maturity structure of 370 firms that are listed on the Karachi Stock Exchange, over the period 2001-2006.In a set of regressions where dependent variable is leverage ratio, baseline results show that leverage ratio increases with size of firm, ratio of fixed-assets-to-total- assets, and decreases with profitability, volatility of net income, dividends payments and growth opportunities. The largest economic effect on leverage ratio is that of the size of firm. These results demonstrate that the trade-off theory and the information asymmetry theory best explains observed capital structure. The results also indicate that leverage ratio decreases when judicial efficiency decreases; however, this relationship is not statistically significant. This is due to the composition effect. Allowing judicial efficiency to interact with the included explanatory variables, the results show that worsening judicial efficiency increases leverage ratios of large firms and decreases leverage ratios of small firms which is an indication of the fact that creditors shift credit away from small firms to large firms in the presence of inefficient judicial system. Results also indicate that the effect of inefficient courts is greater on leverage ratios of firms that have fewer tangible assets as percentage of total assets than on leverage ratios of firms that have more tangible assets. And finally there is some evidence that firms with more volatile net incomes are affected more than firms with less volatile net incomes when judicial efficiency decreases. In debt-maturity regressions, the baseline results indicate that debt-maturity increases with size, tangible assets, and decreases with the firm‘s growth opportunities and inefficiency of judiciary; however, volatility of net income and firm‘s quality do not show any statistically significant relationship with debt-maturity ratio. Allowing for the possibility that judicial inefficiency does not impact all firms alike, the measure of judicial efficiency is interacted with dummy variables that are based on the quartiles of the included explanatory variables. Results of these regressions show that worsening judicial efficiency has far greater negative impact on the debt-maturity ratio of small firms than on the debt-maturity ratio of large firms. Similarly, results show that the effect of inefficient courts is greater on firms that have fewer tangible assets as percentage of total assets than on firms that have more tangible assets. Other firm-specific features like growth opportunities, volatility of net income, and firm‘s quality do not change the impact of judicial inefficiency on the firms‘ debt-maturity ratios.