Stock market development and firm financing choices
AbstractThe authors empirically analyze the association between firm financing choices and the level of development of financial markets in 30 countries for the period 1980-91. For the whole sample, there is a statistically significant negative correlation between stock market development, as measured by the ratio of market capitalization to gross domestic product, and the ratios of both long-term and short-term debt to firms'total equity. For developed markets in the sample, further stock market development leads to a substitution of equity for debt financing. In developing markets, by contrast, large firms become more leveraged as the stock market develops, whereas the smallest firms appear not to be significantly affected by market development.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 1461.
Date of creation: 31 May 1995
Date of revision:
Banks&Banking Reform; Economic Theory&Research; Payment Systems&Infrastructure; Financial Intermediation; International Terrorism&Counterterrorism; Economic Theory&Research; Financial Intermediation; Banks&Banking Reform; Housing Finance; Environmental Economics&Policies;
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