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Globalization and Firms' Financing Choices: Evidence from Emerging Economies

  • Sergio Schmukler
  • Esteban Vesperoni

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.

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File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp388.pdf
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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 388.

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Length: pages
Date of creation: 01 May 2001
Date of revision:
Handle: RePEc:wdi:papers:2001-388
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  1. Obstfeld, Maurice, 1998. "The Global Capital Market: Benefactor or Menace?," Center for International and Development Economics Research, Working Paper Series qt3kn3n2s8, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
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  7. Diamond, Douglas W, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 709-37, August.
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  17. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  18. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-60, December.
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