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Globalization and firms'financing choices - evidence from emerging economies

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  • Schmukler, Sergio
  • Versperoni, Esteban

Abstract

The authors investigate whether integration with global markets affects the financing choices of firms from East Asia and Latin America. Using firm-level data for the 1980s and 1990s, they study how leverage ratios, the structure of debt maturity, and sources of financing change when economies are liberalized and when firms gain access to international equity and bond markets. The evidence shows that integration with world financial markets has uneven effects. On the one hand, debt maturity for the average firm shortens when countries undertake financial liberalization. On the other hand, domestic firms that actually participate in international markets, get better financing opportunities, and extend their debt maturity. Moreover, firms in economies with deeper domestic financial systems are affected less by financial liberalization. Finally, they show that leverage ratios increase during times of crisis. In an appendix, they analyze the previously unstudied case of Argentina, which experienced sharp financial liberalization, and was hit hard by all recent global crises.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2323.

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Date of creation: 30 Apr 2000
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Handle: RePEc:wbk:wbrwps:2323

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Keywords: Banks&Banking Reform; Payment Systems&Infrastructure; Financial Intermediation; Economic Theory&Research; Environmental Economics&Policies; Banks&Banking Reform; Financial Intermediation; Economic Theory&Research; Environmental Economics&Policies; Housing Finance;

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Cited by:
  1. Singh, Bhupal, 2007. "Corporate choice for overseas borrowings: The Indian evidence," MPRA Paper 13220, University Library of Munich, Germany.
  2. Sandra Lizarazo, 2009. "Default Risk and Risk Averse International Investors," Working Papers 0907, Centro de Investigacion Economica, ITAM.
  3. 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.
  4. Kristin J. Forbes, 2007. "The Microeconomic Evidence on Capital Controls: No Free Lunch," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 171-202 National Bureau of Economic Research, Inc.
  5. Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio L., 2002. "Explaining the migration of stocks from exchanges in emerging economies to international centers," Policy Research Working Paper Series 2816, The World Bank.
  6. Radovan Vadovic, 2009. "Early, Late, and Multiple Bidding in Internet Auctions," Working Papers 0904, Centro de Investigacion Economica, ITAM.
  7. 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.
  8. 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.
  9. H. Yeung, 2006. "Change and Continuity in Southeast Asian Ethnic Chinese Business," Asia Pacific Journal of Management, Springer, vol. 23(3), pages 229-254, September.

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