Abstract

http://ssrn.com/abstract=2251422
 
 

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Industry Shocks, Operating Risk, and Corporate Financial Policies around the World


Tanakorn Makaew


University of South Carolina - Moore School of Business

Vojislav Maksimovic


University of Maryland - Robert H. Smith School of Business

January 1, 2014


Abstract:     
Although developing economies are more volatile, firms in developed countries hold more cash and less debt. We show that despite greater aggregate and industry stability, the performance and balance sheets of individual firms in developed countries are more volatile. In developing countries, market imperfections insulate incumbent firms from competitive risk. Cross-country differences in firm rivalry and cash flow risk are greater in technology-intensive, external-finance-dependent, and large-firm-dominated industries where we expect greater market imperfections. Firms in developed countries are more responsive to shocks. Most of the adjustments come from cash balance. Firms in developing countries select financial policies to accommodate lower real risk, and not just in response to market imperfections.

Number of Pages in PDF File: 72

Keywords: International Cash Holding, International Capital Structure, Firm Risk, Volatility, Financial Development

JEL Classification: G15, G31, G32

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Date posted: April 17, 2013 ; Last revised: February 1, 2014

Suggested Citation

Makaew, Tanakorn and Maksimovic, Vojislav, Industry Shocks, Operating Risk, and Corporate Financial Policies around the World (January 1, 2014). Available at SSRN: http://ssrn.com/abstract=2251422 or http://dx.doi.org/10.2139/ssrn.2251422

Contact Information

Tanakorn Makaew (Contact Author)
University of South Carolina - Moore School of Business ( email )
1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
Vojislav Maksimovic
University of Maryland - Robert H. Smith School of Business ( email )
Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)
HOME PAGE: http://www.rhsmith.umd.edu/finance/vmax/
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