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Globalization and Firms' Financing Choices: Evidence From Emerging Economies

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  • Mr. Sergio L. Schmukler
  • Mr. Esteban Vesperoni

Abstract

This paper studies the relation between firm's financing choices and financial globalization. Using an East Asian and Latin American firm-level panel for the 1980s and 1990s, we study how leverage ratios, debt maturity structure, and sources of financing change when economies are liberalized and when firms access international capital markets. We find that debt-equity ratios do not increase after financial liberalization. Debt maturity shortens for the average firm when countries undertake financial liberalization. However, domestic firms that actually participate in international capital markets extend their debt maturity. Financial liberalization has less effects on firms from countries with more developed domestic financial systems. Leverage ratios increase during crises.

Suggested Citation

  • Mr. Sergio L. Schmukler & Mr. Esteban Vesperoni, 2001. "Globalization and Firms' Financing Choices: Evidence From Emerging Economies," IMF Working Papers 2001/095, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2001/095
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    2. Claessens, Stijn & Schmukler, Sergio & Klingebiel, Daniela, 2002. "Explaining the Migration of Stocks from Exchanges in Emerging Economies to International Centres," CEPR Discussion Papers 3301, C.E.P.R. Discussion Papers.
    3. De la Torre, Augusto & Schmukler, Sergio, 2007. "Emerging Capital Markets and Globalization: The Latin American Experience," IDB Publications (Books), Inter-American Development Bank, number 349, November.
    4. Lizarazo, Sandra Valentina, 2013. "Default risk and risk averse international investors," Journal of International Economics, Elsevier, vol. 89(2), pages 317-330.
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    6. Rajeswari Sengupta, 2014. "Firm dollar debt and central bank dollar reserves: Empirical evidence from Latin America," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-013, Indira Gandhi Institute of Development Research, Mumbai, India.
    7. Sanjay Tupe, 2020. "A Study of Capital Structure of Indian Power Generation and Supply Firms: Unbalanced Panel Data," Asian Development Policy Review, Asian Economic and Social Society, vol. 8(2), pages 128-140, June.
    8. Ömer Tuğsal Doruk, 2022. "The link between exchange rate volatility and capital structure under financial liberalization: evidence from the Turkish manufacturing sector," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(3), pages 583-615, September.
    9. Guerrero, Federico, 2007. "Early-stage financial globalization and corporate debt maturity: The case of South Korea, 1980-1994," Journal of Asian Economics, Elsevier, vol. 18(5), pages 809-824, October.
    10. Augusto de la Torre & Sergio L. Schmukler, 2007. "Emerging Capital Markets and Globalization : The Latin American Experience," World Bank Publications, The World Bank, number 7187, September.
    11. Singh, Bhupal, 2007. "Corporate choice for overseas borrowings: The Indian evidence," MPRA Paper 13220, University Library of Munich, Germany.
    12. Aeggarchat Sirisankanan, 2014. "Rethinking Thailand¡¯S Growth Policies," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 39(2), pages 51-73, June.

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