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Globalization and Firms' Financing Choices: Evidence from Emerging Economies

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  • Sergio 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 William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 388.

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Length: pages
Date of creation: 01 May 2001
Date of revision:
Handle: RePEc:wdi:papers:2001-388

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Keywords: financing choices; financial structure; financial integration; financial globalization; international financial markets;

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Cited by:
  1. Sandra Lizarazo, 2009. "Default Risk and Risk Averse International Investors," Working Papers, Centro de Investigacion Economica, ITAM 0907, Centro de Investigacion Economica, ITAM.
  2. Kristin J. Forbes, 2007. "The Microeconomic Evidence on Capital Controls: No Free Lunch," NBER Chapters, National Bureau of Economic Research, Inc, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 171-202 National Bureau of Economic Research, Inc.
  3. 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.
  4. Radovan Vadovic, 2009. "Early, Late, and Multiple Bidding in Internet Auctions," Working Papers, Centro de Investigacion Economica, ITAM 0904, Centro de Investigacion Economica, ITAM.
  5. Federico Guerrero, 2006. "Early-Stage Globalization and Corporate Debt Maturity: The Case of South Korea, 1980-94," Working Papers, University of Nevada, Reno, Department of Economics;University of Nevada, Reno , Department of Resource Economics 06-016, University of Nevada, Reno, Department of Economics;University of Nevada, Reno , Department of Resource Economics.
  6. Singh, Bhupal, 2007. "Corporate choice for overseas borrowings: The Indian evidence," MPRA Paper 13220, University Library of Munich, Germany.
  7. 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, August.
  8. Federico Guerrero & Elliott Parker, 2006. "Financial Liberalization and Corporate Debt Maturity in Thailand, 1993-97," Working Papers, University of Nevada, Reno, Department of Economics;University of Nevada, Reno , Department of Resource Economics 06-001, 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, Springer, vol. 23(3), pages 229-254, September.

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