We study how credit market deregulation and increased international
financial openness have changed corporate borrowing. The evidence
comes from a large panel of publicly traded firms in 38 countries
over the period 1994-2002. Reforms are measured with a
comprehensive new index that tracks six separate dimensions. We
find that these transformations have increased leverage and
lengthened debt maturity in advanced economies, as expected,
suggesting that in these countries corporate credit markets have
become deeper. In emerging economies, the picture is more mixed:
more international openness has led to more leverage but shorter
debt maturity. Financial sector reforms have reduced leverage,
while their effects on debt maturity have differed depending on the
type of reform. Importantly, the differential impact of openness
and reforms on the leverage and debt maturity of firms in advanced
and emerging market countries also emerges when we distinguish
between firms that are potentially financially constrained and
firms that are not. These findings suggest that in emerging
economies fundamental institutional weaknesses make it difficult to
secure the benefits of international financial openness and
domestic financial reforms.
|Country of origin:
Gianni De De Nicol
||Electronic book text
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