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Corporate leverage in EMEs: did the global financial crisis change the determinants?

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  • Snehal S Herwadkar

Abstract

This paper evaluates whether the GFC was instrumental in changing the determinants of corporate leverage in EMEs. This issue is addressed using a panel-GMM framework and quantile analysis with a database comprising more than 2,000 firms in 10 EMEs over a 19-year period. We find that, post-GFC, global financial market and macroeconomic conditions facilitated build-up of corporate leverage. Specifically, global factors, such as the growth of world GDP and the FED shadow rate, have assumed centre stage as determinants of leverage in EMEs. At the same time, some traditional drivers, such as domestic growth and firm-specific factors, have become less important.

Suggested Citation

  • Snehal S Herwadkar, 2017. "Corporate leverage in EMEs: did the global financial crisis change the determinants?," BIS Working Papers 681, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:681
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    Cited by:

    1. Abraham,Facundo & Cortina Lorente,Juan Jose & Schmukler,Sergio L., 2020. "Growth of Global Corporate Debt : Main Facts and Policy Challenges," Policy Research Working Paper Series 9394, The World Bank.
    2. Saurabh Ghosh & Snehal Herwadkar & Radheshyam Verma & Pawan Gopalakrishnan, 2023. "Disentangling demand and supply side determinants of post-GFC credit slowdown: an Indian perspective," Indian Economic Review, Springer, vol. 58(2), pages 399-421, September.
    3. Demirgüç-Kunt, Asli & Martinez Peria, Maria Soledad & Tressel, Thierry, 2020. "The global financial crisis and the capital structure of firms: Was the impact more severe among SMEs and non-listed firms?," Journal of Corporate Finance, Elsevier, vol. 60(C).
    4. Frank Ranganai Matenda & Mabutho Sibanda & Eriyoti Chikodza & Victor Gumbo, 2022. "Bankruptcy prediction for private firms in developing economies: a scoping review and guidance for future research," Management Review Quarterly, Springer, vol. 72(4), pages 927-966, December.
    5. Sahminan, 2021. "Impacts Of Global Financial Conditions On Non-Financial Corporate Leverage In Indonesia," Working Papers WP/14/2021, Bank Indonesia.
    6. Biswajit Banerjee & Jelena Ćirjaković, 2021. "Firm Indebtedness, Deleveraging, and Exit: The Experience of Slovenia during the Financial Crisis, 2008–2014," Eastern European Economics, Taylor & Francis Journals, vol. 59(6), pages 537-570, November.
    7. M. Tiunova G. & М. Тиунова Г., 2018. "Влияние Внешних Шоков На Российскую Экономику // The Impact Of External Shocks On The Russian Economy," Финансы: теория и практика/Finance: Theory and Practice // Finance: Theory and Practice, ФГОБУВО Финансовый университет при Правительстве Российской Федерации // Financial University under The Government of Russian Federation, vol. 22(4), pages 146-170.
    8. Tung Duy Bui & Huan Huu Nguyen & Vu Minh Ngo, 2021. "Financial leverage and performance of SMEs in Vietnam: Evidence from the post-crisis period," Economics and Business Letters, Oviedo University Press, vol. 10(3), pages 229-239.

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    Keywords

    dynamic capital structure; corporate leverage; emerging market economies; global financial crisis;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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