Shocks to the cost of borrowing and capital structure
AbstractWe use the imposition of a non remunerated reserve on short term borrowing in Chile in 1991 as a cuasi natural experiment to test the eﬀects of an increase in the cost of short term borrowing on capital structure and investment. The diﬀerential impact of this regulatory measure across ﬁrms allows us to perform a diﬀerence in diﬀerences analysis. We ﬁnd a drastic drop in short term borrowing of regulated ﬁrms that was almost completely oﬀset by additional long term borrowing. The nature of the experiment allows us to isolate a clear causality from changes in the cost of funds to capital structure, solving some of the endogeneity problems present in preexisting literature.
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Bibliographic InfoPaper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 43165.
Length: 29 pages
Date of creation: 14 Jul 2005
Date of revision:
Find related papers by JEL classification:
- F3 - International Economics - - International Finance
- G3 - Financial Economics - - Corporate Finance and Governance
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- Sebastian Edwards, 1998. "Capital Inflows into Latin America: A Stop-Go Story?," NBER Working Papers 6441, National Bureau of Economic Research, Inc.
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NBER Working Papers
7413, National Bureau of Economic Research, Inc.
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"Controls on Capital Inflows: Do they Work?,"
NBER Working Papers
7645, National Bureau of Economic Research, Inc.
- Manuel Agosin & Ricardo French-Davis, 1997. "Managing capital inflows in Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 24(2 Year 19), pages 297-326, December.
- Rodrigo Cifuentes & Jorge Desormeaux & Claudio González, 2002. "Capital markets in Chile: from financial repression to financial deepening," BIS Papers chapters, in: Bank for International Settlements (ed.), The development of bond markets in emerging economies, volume 11, pages 86-102 Bank for International Settlements.
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