Does the Decision to Issue Public Debt Affect Firm Valuation? Russian Evidence
32 Pages Posted: 28 Nov 2011 Last revised: 19 Jun 2017
Date Written: June 13, 2014
This paper examines the association between firm valuation and the sources of debt financing. In particular, using a sample of 353 firms, we test whether the decision to issue bonds affects the firm's stock market performance in the emerging Russian markets. Our results indicate that public debt financing may have a negative effect on the firm's market valuation. After controlling for the differences in firm-specific characteristics and addressing potential endogeneity issues, we document that the firms which rely on public debt underperform relative to firms with other sources of debt financing in terms of stock market valuation.
Keywords: debt financing, bonds, firm valuation, firm performance, emerging markets
JEL Classification: G10, G15, G30, G32
Suggested Citation: Suggested Citation