Joshua Abor Emmanuel Sarpong-Kumankoma Eme Fiawoyife Kofi A. Osei
Abstract
Purpose – This paper aims to evaluate the effect of risk on the financial policy of emerging market firms. Design/methodology/approach – Using data from 34 emerging markets during a 17-year period, 1990-2006, a panel data model is employed for the analysis. Findings – The results of this study indicate that firms with high probability of survival are likely to employ more debt. The level of risk exposure, particularly business risk is important in influencing the financial decisions of firms in emerging market economies. It is argued that since the use of debt increases firms' exposure to financial risk, firms with high business risk would shy away from using more debt. Also, finance providers in the financial market may not be interested in lending to firms with high business risk. This study also identified profitability, dividend, asset tangibility, growth opportunities, and GDP per capita as important determinants of the financial policy of emerging market firms. Originality/value – This study contributes to the extant literature by providing empirical evidence regarding the effect of risk on the financial policy of emerging market firms.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.