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Maturity Mismatch and Financial Crises: Evidence from Emerging Market Corporations

  • Bleakley, Hoyt C
  • Cowan, Kevin

Substantial attention has been paid in recent years to the risk of maturity mismatch in emerging markets. Although this risk is microeconomic in nature, the evidence advanced thus far has taken the form of macro correlations. We evaluate this mechanism empirically at the micro level by using a database of over 3000 publicly traded firms from fifteen emerging markets. We measure the risk of short-term exposure by estimating, at the firm level, the effect on investment of the interaction of short-term exposure and aggregate capital flows. This effect is (statistically) zero, contrary to the prediction of the maturity-mismatch hypothesis. This conclusion is robust to using a variety of different estimators, alternative measures of capital flows, and controls for devaluation effects and access to international capital. We do find evidence that short-termexposed firms pay higher financing costs and liquidate assets at “fire sale†prices, but not that this reduction in net worth translates into a drop in investment.

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Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt96r800f1.

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Date of creation: 01 Dec 2004
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Handle: RePEc:cdl:ucsdec:qt96r800f1
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  16. Hoyt Bleakley & Kevin Cowan, 2005. "Corporate Dollar Debt and Depreciations: Much Ado About Nothing?," Research Department Publications 4411, Inter-American Development Bank, Research Department.
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