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Debt, Folklore, And Cross-Country Differences In Financial Structure

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  • Raghuram Rajan
  • Luigi Zingales

Abstract

Conventional wisdom has long held that, in relationship-based economies such as Japan and Germany, corporations are able to borrow more than U.S. companies, which in turn reduces their cost of capital and gives them a competitive edge. But such folklore does not stand up to scrutiny. In Japan and Germany, large businesses do not borrow more than U.S. companies-and, in fact, judging from coverage ratios, German companies (as well as U.K. companies) seem to borrow considerably less than their international competitors. 1998 Morgan Stanley.

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Bibliographic Info

Article provided by Morgan Stanley in its journal Journal of Applied Corporate Finance.

Volume (Year): 10 (1998)
Issue (Month): 4 ()
Pages: 102-107

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Handle: RePEc:bla:jacrfn:v:10:y:1998:i:4:p:102-107

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Cited by:
  1. Datta, Rajib & Chowdhury, Tasnim & Mohajan, Haradhan, 2013. "Reassess of capital structure theories," MPRA Paper 51165, University Library of Munich, Germany, revised 10 Jul 2013.
  2. Oxelheim, Lars & Randøy, Trond & Stonehill, Arthur, 2001. "On the Treatment of Finance-Specific Factors Within the OLI Paradigm," Working Paper Series 554, Research Institute of Industrial Economics.
  3. Aggarwal, Raj & Kyaw, NyoNyo A., 2008. "Internal capital networks as a source of MNC competitive advantage: Evidence from foreign subsidiary capital structure decisions," Research in International Business and Finance, Elsevier, vol. 22(3), pages 409-439, September.
  4. Djankov, Simeon & Jindra, Jan & Klapper, Leora F., 2005. "Corporate valuation and the resolution of bank insolvency in East Asia," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2095-2118, August.
  5. Gande, Amar & John, Kose & Senbet, Lemma W., 2008. "Bank incentives, economic specialization, and financial crises in emerging economies," Journal of International Money and Finance, Elsevier, vol. 27(5), pages 707-732, September.

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