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Corporate financing patterns in emerging markets in the 1980s and the 1990s

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  • Singh, Ajit

Abstract

This paper addresses the following main issues: (1) What is the nature of corporate financing patterns (i.e. how corporations finance their investments and growth) in emerging markets, and how have these evolved during the 1980s and 1990s? (2) Are there significant differences in financing patterns (a) between emerging and mature markets, and, (b) between emerging markets themselves. (3) Can economic theory adequately explain the observed inter-country differences in financing patterns as well as the changes in these over time? (4) How do corporate financing patterns affect corporate governance? How does the latter in turn influence the former? The paper builds on the author's previous work in this field. [Singh and Hamid (1993), Singh (1995), Whittington, Singh and Saporta (1997), Singh (1997) and Singh and Weisse (1998)]. The former two studies were among the first large-scale comparative empirical analyses of corporate financing patterns in emerging markets (hereafter referred to as SH) . SH arrived at surprising and quite unexpected conclusions. This research showed that although there were variations in corporate financing patterns among developing countries, in general, corporations in the sample countries used more external than internal funds, to finance the growth of their net assets. Further, within external sources, the average developing country corporation used new share issues on the stock market to a surprisingly large degree. Even at an elementary level these conclusions are quite contrary to a priori expectations. In view of the low level of development and myriad imperfections of developing country capital markets, one would have expected these corporations to use more internal rather than external finance. For similar reasons, one would not expect immature and small stock markets to be a prominent source of funds for developing country corporations.

Suggested Citation

  • Singh, Ajit, 2001. "Corporate financing patterns in emerging markets in the 1980s and the 1990s," MPRA Paper 53663, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:53663
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    References listed on IDEAS

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    1. Mr. Mohamed A. El-Erian & Mr. Manmohan S. Kumar, 1994. "Emerging Equity Markets in Middle Eastern Countries," IMF Working Papers 1994/103, International Monetary Fund.
    2. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    3. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    4. Cobham, David & Subramaniam, Ramesh, 1998. "Corporate finance in developing countries: New evidence for India," World Development, Elsevier, vol. 26(6), pages 1033-1047, June.
    5. Ajit Singh, 1999. "Should Africa promote stock market capitalism?," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(3), pages 343-365.
    6. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    7. Harris, Milton & Raviv, Artur, 1991. "The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
    8. Whittington, G & Saporta, V & Singh, A, 1997. "The Effects of Hyper-Inflation on Accounting Ratios. Financing Corporate Growth in Industrial Economies," Papers 3, World Bank - International Finance Corporation.
    9. Singh, Ajit & Weisse, Bruce A., 1998. "Emerging stock markets, portfolio capital flows and long-term economie growth: Micro and macroeconomic perspectives," World Development, Elsevier, vol. 26(4), pages 607-622, April.
    10. Stewart C. Myers, 2001. "Capital Structure," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 81-102, Spring.
    11. John Mullin, 1993. "Emerging equity markets in the global economy," Quarterly Review, Federal Reserve Bank of New York, vol. 18(Sum), pages 54-83.
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    13. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
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    15. Corbett, Jennifer & Jenkinson, Tim, 1994. "The Financing of Industry, 1970-89: An International Comparison," CEPR Discussion Papers 948, C.E.P.R. Discussion Papers.
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    More about this item

    Keywords

    country corporations; developing country; stock market; empirical analyses; emerging markets; financing patterns;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General
    • F0 - International Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • G3 - Financial Economics - - Corporate Finance and Governance
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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