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Maturity Mismatch and Financial Crises: Evidence from Emerging Market Corporations

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Author Info
Hoyt Bleakley (University of California, San Diego)
Kevin Cowan (Inter-American Development Bank)

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Abstract

Substantial attention has been paid in recent years to the risk of maturity mismatch in emerging markets. Although this risk is microeconomic in nature, the evidence advanced thus far has taken the form of macro correlations. We evaluate this mechanism empirically at the micro level by using a database of over 3000 publicly traded firms from fifteen emerging markets. We measure the risk of short-term exposure by estimating, at the firm level, the effect on investment of the interaction of short-term exposure and aggregate capital flows. This effect is (statistically) zero, contrary to the prediction of the maturity-mismatch hypothesis. This conclusion is robust to using a variety of different estimators, alternative measures of capital flows, and controls for devaluation effects and access to international capital. We do find evidence that short-termexposed firms pay higher financing costs and liquidate assets at "fire sale" prices, but not that this reduction in net worth translates into a drop in investment.

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Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number 2004-16.

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Date of creation: 01 Dec 2004
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Handle: RePEc:cdl:ucsdec:2004-16

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Keywords: Maturity Mismatch; investment; financial crises;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Larry Lang & Eli Ofek & Rene M. Stulz, 1995. "Leverage, Investment, and Firm Growth," NBER Working Papers 5165, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. R. Glenn Hubbard, 1997. "Capital-Market Imperfections and Investment," NBER Working Papers 5996, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange Rates and Financial Fragility," NBER Working Papers 7418, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June. [Downloadable!] (restricted)
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  5. Roberto Chang & Andres Velasco, 1999. "Liquidity Crises in Emerging Markets: Theory and Policy," NBER Working Papers 7272, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Guillermo Calvo & Alejandro Izquierdo & Luis-Fernando Mejía, 2004. "On the empirics of Sudden Stops: the relevance of balance-sheet effects," Proceedings, Federal Reserve Bank of San Francisco, issue Jun. [Downloadable!]
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  7. Francisco A. Gallego & Norman Loayza, 2000. "Financial Structure in Chile: Macroeconomic Developments and Microeconomic Effects," Econometric Society World Congress 2000 Contributed Papers 1115, Econometric Society. [Downloadable!]
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  8. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112. [Downloadable!] (restricted)
  9. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 33-60, February. [Downloadable!] (restricted)
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  10. Love, Inessa, 2001. "Financial development and financing constraints - international evidence from the structural investment model," Policy Research Working Paper Series 2694, The World Bank. [Downloadable!]
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  11. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1988-1), pages 141-206. [Downloadable!]
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  12. Detragiache, Enrica & Spilimbergo, Antonio, 2004. "Empirical models of short-term debt and crises: Do they test the creditor run hypothesis?," European Economic Review, Elsevier, vol. 48(2), pages 379-389, April. [Downloadable!] (restricted)
  13. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1998-1), pages 1-90. [Downloadable!]
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  1. Hanan Morsy & Akiko Terada-Hagiwara & Maria Pia Iannariello, 2007. "Role of Debt Maturity Structure on Firm Fixed Assets During Sudden Stop Episodes: Evidence from Thailand," IMF Working Papers 07/11, International Monetary Fund. [Downloadable!]
  2. Uluc Aysun, 2006. "Capital Flows, Maturity Mismatches and Profitability in Emerging Markets: Evidence from Bank Level Data," Working papers 2006-29, University of Connecticut, Department of Economics, revised Oct 2007. [Downloadable!]
  3. Mehtap Kesriyeli & Erdal Ozmen & Serkan Yigit, 2005. "Corporate Sector Debt Composition and Exchange Rate Balance Sheet Effect in Turkey," Working Papers 0516, Research and Monetary Policy Department, Central Bank of the Republic of Turkey. [Downloadable!]
  4. Halil Ibrahim Aydin & Cafer Kaplan & Mehtap Kesriyeli & Erdal Ozmen & Cihan Yalcin & Serkan Yigit, 2006. "Corporate Sector Financial Structure in Turkey : A Descriptive Analysis," Working Papers 0607, Research and Monetary Policy Department, Central Bank of the Republic of Turkey. [Downloadable!]
  5. Mehtap Kesriyeli & Erdal Ozmen & Serkan Yigit, 2005. "Corporate Sector Debt Composition and Exchange Rate Balance Sheet Effect in Turkey," ERC Working Papers 0507, ERC - Economic Research Center, Middle East Technical University, revised Nov 2005. [Downloadable!]
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