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Why Have Debt Ratios Increased for Firms in Emerging Markets?


  • Todd Mitton


"I study trends in capital structure between 1980 and 2004 in a sample of over 11,000 firms from 34 emerging markets. The average firm's market-value debt ratio rose by 15 percentage points over this quarter century. I study how this rise in leverage was influenced by firm-level factors and by the availability of debt financing at the country level. The central finding is that the increase in debt ratios can largely be attributed to changes in the characteristics of emerging market firms over this period. For the average firm, the most prominent determinants of capital structure - size, profitability, asset tangibility, and growth opportunities - all shifted in the direction implying a higher optimal level of debt. At the country level, increased financial development within the country is associated with lower debt ratios, but increased financial openness to foreign markets is associated with higher debt ratios." Copyright 2007 The Author Journal compilation (c) Blackwell Publishing Ltd.

Suggested Citation

  • Todd Mitton, 2008. "Why Have Debt Ratios Increased for Firms in Emerging Markets?," European Financial Management, European Financial Management Association, vol. 14(1), pages 127-151.
  • Handle: RePEc:bla:eufman:v:14:y:2008:i:1:p:127-151

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    Cited by:

    1. Alves, Paulo & Francisco, Paulo, 2013. "The Impact of Institutional Environment in Firms´ Capital Structure during the Recent Financial Crises," MPRA Paper 51300, University Library of Munich, Germany.
    2. Shailer, Greg & Wang, Kun, 2015. "Government ownership and the cost of debt for Chinese listed corporations," Emerging Markets Review, Elsevier, vol. 22(C), pages 1-17.
    3. Leonel Rodrigues Bogéa Sobrinho & Hsia Hua Sheng & Mayra Ivanoff Lora, 2012. "Country Factors and Dynamic Capital Structure in Latin American Firms," Brazilian Review of Finance, Brazilian Society of Finance, vol. 10(2), pages 267-284.
    4. Keasey, Kevin & Martinez, Beatriz & Pindado, Julio, 2015. "Young family firms: Financing decisions and the willingness to dilute control," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 47-63.
    5. Rashid Ameer, 2013. "Financial liberalization and firms’ capital structure adjustments evidence from Southeast Asia and South America," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 37(1), pages 1-32, January.

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