Corporate Leverage, the Cost of Capital,and the Financial Crisis in Latin America
Using a quarterly dataset of 185 listed firms in six Latin American countries between 1993 and 2009 we find that leverage is positively related to tangibility, firm size and the market to book ratio, and negatively related to profitability. The average cost of debt is negatively related with size, tangibility, firm growth, the leverage ratio, and the ratio of long- to short-term debt and positively to profitability. We find that the recent international crisis did not have a significant impact on the set of firms in our sample, but affected the way in which leverage and the interest to debt ratio relate to firm fundamentals. In particular we find that the links between leverage, tangibility and profitability were strengthened, and that financial constraints were not increased during the crisis.The evidence is consistent with a flight-to-quality phenomenon in favor of big, listed firms.
|Date of creation:||May 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 21- 1466
Web page: http://www.depeco.econo.unlp.edu.ar/doctrab.php
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Campello, Murillo & Graham, John R. & Harvey, Campbell R., 2010.
"The real effects of financial constraints: Evidence from a financial crisis,"
Journal of Financial Economics,
Elsevier, vol. 97(3), pages 470-487, September.
- Murillo Campello & John Graham & Campbell R. Harvey, 2009. "The Real Effects of Financial Constraints: Evidence from a Financial Crisis," NBER Working Papers 15552, National Bureau of Economic Research, Inc.
- Heitor Almeida & Murillo Campello & Bruno Laranjeira & Scott Weisbenner, 2009. "Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis," NBER Working Papers 14990, National Bureau of Economic Research, Inc.
- Michael L. Lemmon & Michael R. Roberts & Jaime F. Zender, 2008. "Back to the Beginning: Persistence and the Cross-Section of Corporate Capital Structure," Journal of Finance, American Finance Association, vol. 63(4), pages 1575-1608, 08.
- Lemmon, Michael & Roberts, Michael R., 2010. "The Response of Corporate Financing and Investment to Changes in the Supply of Credit," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(03), pages 555-587, June.
- Malcolm Baker & Richard S. Ruback & Jeffrey Wurgler, 2004. "Behavioral Corporate Finance: A Survey," NBER Working Papers 10863, National Bureau of Economic Research, Inc.
- Schiantarelli, Fabio, 1996. "Financial Constraints and Investment: Methodological Issues and International Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 12(2), pages 70-89, Summer.
- Levy, Amnon & Hennessy, Christopher, 2007. "Why does capital structure choice vary with macroeconomic conditions?," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1545-1564, September.
- Djankov, Simeon & McLiesh, Caralee & Shleifer, Andrei, 2007.
"Private credit in 129 countries,"
Journal of Financial Economics,
Elsevier, vol. 84(2), pages 299-329, May.
- Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987.
"Financing Constraints and Corporate Investment,"
NBER Working Papers
2387, National Bureau of Economic Research, Inc.
- Mitchell A. Petersen, 2005.
"Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches,"
NBER Working Papers
11280, National Bureau of Economic Research, Inc.
- Mitchell A. Petersen, 2009. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 435-480, January.
- Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
- Frank, Murray Z. & Goyal, Vidhan K., 2009.
"Capital Structure Decisions: Which Factors are Reliably Important?,"
22525, University Library of Munich, Germany.
- Murray Z. Frank & Vidhan K. Goyal, 2009. "Capital Structure Decisions: Which Factors Are Reliably Important?," Financial Management, Financial Management Association International, vol. 38(1), pages 1-37, 03.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
- Jules H. van Binsbergen & John Graham & Jie Yang, 2010.
"The Cost of Debt,"
NBER Working Papers
16023, National Bureau of Economic Research, Inc.
- Elsas, Ralf & Florysiak, David, 2008. "Empirical Capital Structure Research: New Ideas, Recent Evidence, and Methodological Issues," Discussion Papers in Business Administration 4743, University of Munich, Munich School of Management.
- repec:cup:cbooks:9780521793421 is not listed on IDEAS
- Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
- repec:cup:cbooks:9780521797320 is not listed on IDEAS
- Korajczyk, Robert A. & Levy, Amnon, 2003. "Capital structure choice: macroeconomic conditions and financial constraints," Journal of Financial Economics, Elsevier, vol. 68(1), pages 75-109, April.
- Kadapakkam, Palani-Rajan & Kumar, P. C. & Riddick, Leigh A., 1998. "The impact of cash flows and firm size on investment: The international evidence," Journal of Banking & Finance, Elsevier, vol. 22(3), pages 293-320, March.
When requesting a correction, please mention this item's handle: RePEc:lap:wpaper:085. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diego Fernandez Felices)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.