Maturity Mismatch and Financial Crises: Evidence from Emerging Market Corporations
C. Hoyt Bleakley
University of Chicago - Booth School of Business; University of Chicago
Inter-American Development Bank (IDB)
December 17, 2004
UCSD Discussion Paper No. 2004-16
Substantial attention has been paid in recent years to the risk of maturity mismatch in emerging markets. Although this risk is microeconomic in nature, the evidence advanced thus far has taken the form of macro correlations. We evaluate this mechanism empirically at the micro level by using a database of over 3000 publicly traded firms from fifteen emerging markets. We measure the risk of short-term exposure by estimating, at the firm level, the effect on investment of the interaction of short-term exposure and aggregate capital flows. This effect is (statistically) zero, contrary to the prediction of the maturity-mismatch hypothesis. This conclusion is robust to using a variety of different estimators, alternative measures of capital flows, and controls for devaluation effects and access to international capital. We do find evidence that short-term-exposed firms pay higher financing costs and liquidate assets at "fire sale" prices, but not that this reduction in net worth translates into a drop in investment.
Number of Pages in PDF File: 49
Keywords: maturity mismatch, investment, financial crises
JEL Classification: E22, F41, G31, G32working papers series
Date posted: February 28, 2005
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