| The World Bank (2007) | |||||||||||||||||
Abstract | |||||||||||||||||
| This paper investigates whether integration with global markets affects the financing choices of firms from East Asia and Latin America. Using a 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 equity and bond markets. The evidence shows that integration with world financial markets has uneven effects. On the one hand, the debt maturity for the average firm shortens when countries undertake financial liberalization. On the other hand, domestic firms that actually participate in international markets obtain better financing opportunities and extend their debt maturity. Additionally, firms in economies with more developed domestic financial systems are less affected by financial liberalization. Finally, the paper finds that leverage ratios increase during crisis times. In the appendix, we analyze the previously unstudied case of Argentina, which experienced a sharp financial liberalization and was hit hard by all recent global crises. | |||||||||||||||||
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