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Impacts Of Global Financial Conditions On Non-Financial Corporate Leverage In Indonesia

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Abstract

This paper examines the effects of global financial conditions on non-financial corporate leverage in Indonesia. We estimate panel data models using individual data of Indonesian publicly listed non-financial firms with quarterly frequency covering the period from 2004 to 2021. The estimation results show that looser global financial conditions, measured by lower US shadow rates, positively affect the leverage growth of the publicly listed non-financial firms in Indonesia. Nonetheless, the effect is less than that of other emerging market economies in general. Moreover, we also find that firms classified as high debt and state-owned enterprises are more sensitive to global financial conditions. On the other hand, firms classified as having a high-interest coverage ratio are less sensitive to global financial conditions. Meanwhile, the effects of global financial conditions on non-financial corporate leverage are not significantly different across economic sectors. The findings in this paper suggest that non-financial firm leverage in Indonesia is not immune to the fluctuations in global financial conditions, and the effects could vary across classifications of firms.

Suggested Citation

  • Sahminan, 2021. "Impacts Of Global Financial Conditions On Non-Financial Corporate Leverage In Indonesia," Working Papers WP/14/2021, Bank Indonesia.
    • Handle: RePEc:idn:wpaper:wp142021
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    More about this item

    Keywords

    Global financial conditions; non-financial corporates; leverage; Indonesia;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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