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Globalization and Firms' Financing Choices

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  • Sergio L. Schmukler
  • Esteban Vesperoni

Abstract

This paper studies the relation between firm''s financing choices and financial globalization. Using an East Asian and Latin American firm-level panel for the 1980s and 1990s, we study how leverage ratios, debt maturity structure, and sources of financing change when economies are liberalized and when firms access international capital markets. We find that debt-equity ratios do not increase after financial liberalization. Debt maturity shortens for the average firm when countries undertake financial liberalization. However, domestic firms that actually participate in international capital markets extend their debt maturity. Financial liberalization has less effects on firms from countries with more developed domestic financial systems. Leverage ratios increase during crises.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/95.

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Length: 26
Date of creation: 01 Aug 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/95

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  1. McKinnon, Ronald I & Pill, Huw, 1997. "Credible Economic Liberalizations and Overborrowing," American Economic Review, American Economic Association, vol. 87(2), pages 189-93, May.
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  8. Ricardo Caballero & Arvind Krishnamurthy, 1998. "Emerging Market Crises: An Asset Markets Perspective," Working papers 98-18, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Hargis, Kent & Ramanlal, Pradipkumar, 1998. "When Does Internationalization Enhance the Development of Domestic Stock Markets?," Journal of Financial Intermediation, Elsevier, vol. 7(3), pages 263-292, July.
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  13. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
  14. Rene M. Stulz, 1999. "Globalization of Equity Markets and the Cost of Capital," NBER Working Papers 7021, National Bureau of Economic Research, Inc.
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  16. Fabio Schiantarelli & Fidel Jaramillo, 2002. "Access to Long Term Debt and Effects on Firms' Performance: Lessons from Ecuador," Research Department Publications 3153, Inter-American Development Bank, Research Department.
  17. Morris, James R, 1976. "On Corporate Debt Maturity Strategies," Journal of Finance, American Finance Association, vol. 31(1), pages 29-37, March.
  18. Diamond, Douglas W, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 709-37, August.
  19. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
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Citations

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Cited by:
  1. Federico Guerrero & Elliott Parker, 2006. "Financial Liberalization and Corporate Debt Maturity in Thailand, 1993-97," Working Papers 06-001, University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics.
  2. Kristin J. Forbes, 2005. "The Microeconomic Evidence on Capital Controls: No Free Lunch," NBER Working Papers 11372, National Bureau of Economic Research, Inc.
  3. Sandra Lizarazo, 2009. "Default Risk and Risk Averse International Investors," Working Papers 0907, Centro de Investigacion Economica, ITAM.
  4. Augusto de la Torre & Sergio L. Schmukler, 2007. "Emerging Capital Markets and Globalization : The Latin American Experience," World Bank Publications, The World Bank, number 7187, October.
  5. Radovan Vadovic, 2009. "Early, Late, and Multiple Bidding in Internet Auctions," Working Papers 0904, Centro de Investigacion Economica, ITAM.
  6. Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio, 2002. "Explaining the Migration of Stocks from Exchanges in Emerging Economies to International Centres," CEPR Discussion Papers 3301, C.E.P.R. Discussion Papers.
  7. Federico Guerrero, 2006. "Early-Stage Globalization and Corporate Debt Maturity: The Case of South Korea, 1980-94," Working Papers 06-016, University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics.

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