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Contractual savings, capital markets, and firms'financing choices

  • Musalem, Alberto R.
  • Impavido, Gregorio
  • Tressel, Thierry

The authors analyze the relationship between the development and asset allocation of contractual savings and firms'capital structures. The authors develop a simple model of firms'leverage and debt maturity decisions. They illustrate the mechanisms through which contractual savings development may affect corporate financing patterns. In the empirical section, the authors show that the development and asset allocation of contractual savings have an independent impact on firms'financing choices. Different channels are identified. In market-based economies, an increase in the proportion of shares in the portfolio of contractual savings leads to a decline in firms'leverage. In bank-based economies, instead, an increase in the size of contractual savings is associated with an increase in leverage and debt maturity in the corporate sector

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2612.

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Date of creation: 01 Jun 2001
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Handle: RePEc:wbk:wbrwps:2612
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  1. Paul A. Gompers & Andrew Metrick, . "Institutional Investors and Equity Prices," Rodney L. White Center for Financial Research Working Papers 20-99, Wharton School Rodney L. White Center for Financial Research.
  2. Impavido, Gregorio & Musalem, Alberto R., 2000. "Contractual savings, stock, and asset markets," Policy Research Working Paper Series 2490, The World Bank.
  3. von Thadden, Ernst-Ludwig, 1995. "Long-Term Contracts, Short-Term Investment and Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 557-75, October.
  4. Patrick Rey & Joseph E. Stiglitz, 1993. "Short-Term Contracts as a Monitoring Device," NBER Working Papers 4514, National Bureau of Economic Research, Inc.
  5. Erik Berglof & Ernst-Ludwig von Thadden, 1994. "Capital Structure with Multiple Investors," CEPR Financial Markets Paper 0044, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
  6. Walker, Eduardo & Lefort, Fernando, 2002. "Pension reform and capital markets : are there any (hard) links?," Social Protection Discussion Papers 24082, The World Bank.
  7. Pomerleano, Michael, 1998. "The East Asia crisis and corporate finances : the untold micro story," Policy Research Working Paper Series 1990, The World Bank.
  8. Vittas, Dimitri & Skully, Michael, 1991. "Overview of contractual savings institutions," Policy Research Working Paper Series 605, The World Bank.
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