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Currency mismatches in emerging markets: Effects on corporate liquidity, investment dynamics and performance

Author

Listed:
  • De Gregorio, José
  • de la Horra, Luis P.
  • Jara, Mauricio

Abstract

We examine how USD-denominated bond issuance by non-financial listed firms in emerging market economies affects cash holdings and real activity under currency depreciations and shifting external borrowing conditions. Using firm-year data for 1655 listed firms in fifteen EMEs (2001–2016) and an issuance-based measure of offshore access, we find that issuing abroad raises cash holdings and increases investment with a lag, consistent with a save-to-invest motive. These effects are stronger when country-level risk-adjusted domestic–U.S. borrowing spreads are high. Depreciations dampen the contemporaneous cash buildup but do not systematically reduce investment or competitiveness. Instead, firms expand working capital and, when depreciations coincide with high spreads, increase sales and capacity utilization, indicating adjustment through liquidity and operational margins rather than sharp balance-sheet distress.

Suggested Citation

  • De Gregorio, José & de la Horra, Luis P. & Jara, Mauricio, 2026. "Currency mismatches in emerging markets: Effects on corporate liquidity, investment dynamics and performance," The North American Journal of Economics and Finance, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:ecofin:v:83:y:2026:i:c:s1062940826000173
    DOI: 10.1016/j.najef.2026.102597
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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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