Capital Structure and Debt Maturity: Evidence from Emerging Markets (original) (raw)
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Leverage and the Maturity Structure of Debt in Emerging Markets
Journal of Mathematical Finance, 2013
The aim of this paper is to analyse for a multi-country large emerging market sample the choice between debt and equity simultaneously with the decision between short-and long-term debts. In order to investigate the joint decision among leverage and maturity, we examine an unique sample of 986 firms and 13,490 firm-year observations from Latin America and 686 firms and 7919 firm-year observations from Eastern Europe for the period 1990-2003. We employ dynamic panel data analysis using Generalized Method of moments. The empirical results support three main findings. First, the cross-effects between leverage and maturity behave exactly the opposite between Latin America and Eastern Europe sub-samples. Capital structure and debt maturity are policy complements in Latin America and substitutes in Eastern Europe. Second, there is a significant dynamic effects component in the determination of leverage and maturity. Finally, adjustment to the target maturity is by no means costless and instantaneous with firm facing moderate adjustment costs.
An international comparison of capital structure and debt maturity choices
2010
This study examines the capital structure and debt maturity choices of firms in a crosssection of 39 developed and developing countries, focusing on the effect of the countries' public policies and institutional structures. Our analysis suggests that a country's taxation and inflation policies as well as its legal institutions have an important effect on how its corporations are financed. Specifically, the preferential tax treatment of dividends is associated with lower leverage, high inflation is associated with lower leverage and the use of short-term debt and corruption increases financial leverage and reduces the maturity structure of the debt. However, controlling for corruption, the legal system per se -i.e., whether the country adopts a common law system -only influences the debt maturity decision. In addition, the financial institutions that supply capital influence the type of capital that is used. In particular, countries with large amounts of bank deposits tend to have shorter debt maturities and countries with a greater presence of other institutional investors are less levered and have longer debt maturities. We also find that the presence of information intermediaries is associated with lower leverage and the use of trade credit, highlighting their role in facilitating information dissemination.
Capital structure decisions in a period of economic intervention
International Journal of Accounting & Information Management, 2020
PurposeThis paper aims to analyse the Portuguese companies’ determinants of capital structure. To reach this objective, the authors used data from 37 non-financial Portuguese large enterprises and from 4,233 non-financial small and medium enterprises for the period 2010-2016. Additionally, the authors selected a sub-period from 2010 to 2014 for a deeper understanding of the impact of the sovereign debt crisis and the Economic Adjustment Programme of Troika on the capital structure of those companies.Design/methodology/approachThree dependent variables were tested according to debt maturity, and a dynamic panel data model, namely, the generalised method of moments system estimator, was used to test the formulated research hypotheses following Arellano and Bover (1995) and Blundell and Bond (1998) to capture the dynamic nature of the firm’s capital structure decisions.FindingsIn general, the results point out that the capital structure decisions depend on a set of firm-specific factor...
The Determinants of Corporate Debt Maturity Structure
SSRN Electronic Journal
This study examines the determinants of corporate debt maturity structure decisions of French, German and UK firms using panel data. These countries are characterised by different financial systems and traditions that have implications on how firms decide their debt maturity structure. We apply several alternative estimation methods and show that in debt structure modelling endogeneity problem should be controlled for. We do so by using Generalised Method of Moments (GMM) estimation method. The GMM results suggest that firms in all three countries adjust their debt ratios to attain their target maturity structure. However, the speed at which firms adjust their maturity structure towards their target levels differs from one country to another. A direct association of debt maturity with leverage in all countries confirms the predictions of the liquidity risk argument. However, corporate tax rate, growth opportunities, liquidity, firm quality, earnings volatility, asset maturity and fi...
Capital Structure and the Firm Characterstics: Evidence from an Emerging Market
SSRN Electronic Journal, 2002
We examine the determinants of capital structure of Malaysian companies utilizing data from 1984 to 1999. We classify data into four sub-periods that correspond to different stages of Malaysian capital market. Debt is decomposed into three categories: short-term, long-term and total debt. Both book value and market value debt ratios are calculated. The results of pooled OLS regressions show that profitability, size, growth, risk and tangibility variables have significant influence on all types of debt. These results are normally consistent with the results of fixed effect estimation with the exception that risk variable loses its significance. Unlike the evidence from the developed markets, investment opportunity (market-to-book value ratio) has no significant impact on debt policy in the emerging market of Malaysia. Our results are generally robust to time periods, but the significance of some variables changes over time. Profitability has a persistent and consistent negative relationship with all types of debt ratios in all periods and under all estimation methods. This confirms the capital structure prediction of the pecking order theory in an emerging capital market.
Eurasian Journal of Business and Economics, 2018
This study is based on the non-financial companies within the fragile five countries (Turkey, Brazil, South Africa, India and Indonesia) during the period of 2004-2013. The factors affecting capital structure were assessed along with micro and macro variables for these countries. The micro variables (firm specific) included in the model were the debt taken in the previous year, firm size, growth, industry debt average, and the tangibility and profitability ratio; GDP growth, inflation and exchange rate change were included in the model as macroeconomic variables. Also, the effects of financial crises were analyzed by treating pre-and post-2008 crisis periods separately. Panel data analysis techniques are used to identify the relationships between these determinants and capital structure. The relationship between the real effective exchange rate and the debt ratio was positive in the precrisis five-country model, but it turned negative in the post-crisis model. A statistically significant relationship was discovered between the GDP growth rate and the debt ratio only for Turkey for the full period (2004-2013) and for India for the period between 2006 and 2013. On the other hand, a positive relationship was found between the inflation rate and the debt ratio for the general (2004-2013) and post-crisis models.
Capital Structure Determinants in Transitional Economies
International Journal of Commerce and Finance, 2019
Most of the empirical studies about capital structure tend to focus either on overall developed markets or on emerging countries. This paper aims to analyze the determinants of the capital structure of the companies in the Western Balkans (WBs) using a panel of 30 non-financial firms listed in Zagreb Stock Exchange, Belgrade Stock Exchange, and Macedonian Stock Exchange over the period of 2012-2017. The leverage ratio is modeled as a function of firm-specific characteristics. The study shows that firms in the WBs tend to rely more on short-term debt rather than long-term debt. There is a significant negative impact of liquidity, profitability and tax on both leverage level and short-term debt ratio. The long-term debt ratio is significantly positively affected by the growth opportunities of these companies and by its past level. theory. The results obtained from this empirical research indicate that companies in the WBs follow the pecking order. These findings appear to be similar to the results of previous studies of this nature done about emerging and transitional economies.
Determinants of Capital Structure in Emerging European Economies: Evidence from Slovenian Firms
Emerging Markets Finance and Trade, 2009
Capital structure decision is an important corporate behavior which draws strong interest from different stakeholders. It is more important in emerging markets due to their unique legal, cultural and institutional characteristics. This paper sheds further light on the question of whether capital structure determinants are different in emerging markets. We utilize a new and unique data set containing firm specific attributes over the period from 2006 to 2015. Employing GMM estimator to control for endogeneity, the results indicate that the determinants of capital structure are different for long-term and short-term indicators.
Capital Structure in Mena Region: A Panel Data Analysis
2019
In this paper we make an attempt to provide some insight into the capital structure choice of the MENA region for the period 2006-2015. We develop a dynamic panel data model that explicitly takes into account the determinants of capital structure choice. It has been concluded that factors such as size, profitability, asset tangibility and rating have significant impact on the leverage structure by firms in the MENA region context.