Policy initiatives and firms' access to external finance: Evidence from a panel of emerging Asian economies

This paper analyses the impact of policy initiatives co-ordinated by Asian national governments on firms' composition of external finance. Using a unique firm-level database of eight Asian countries - Hong Kong SAR, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand over the period of 1996-2012 and a difference-in-differences approach, the results show a significant impact of policy initiatives on firms' choice to external finance. We find that firms increased their uptake of long-term debt, while decreased their short-term debt. We also document that less risky and more profitable firms are more significantly affected by the policy change than riskier and less profitable firms. Finally, we show that the improved access to external finance after the policy initiative helped firms to raise their investment spending.