Does the Decision to Issue Public Debt Affect Firm Valuation? Russian Evidence

32 Pages Posted: 28 Nov 2011 Last revised: 19 Jun 2017

See all articles by Denis Davydov

Denis Davydov

University of Vaasa - Department of Accounting and Finance

Jussi Nikkinen

University of Vaasa - Department of Accounting and Finance

Sami Vähämaa

University of Vaasa

Date Written: June 13, 2014

Abstract

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

Davydov, Denis and Nikkinen, Jussi and Vähämaa, Sami, Does the Decision to Issue Public Debt Affect Firm Valuation? Russian Evidence (June 13, 2014). Emerging Markets Review, Vol. 20, No. 1, pp. 136-151, 2014 . Available at SSRN: https://ssrn.com/abstract=1965424 or http://dx.doi.org/10.2139/ssrn.1965424

Denis Davydov

University of Vaasa - Department of Accounting and Finance ( email )

P.O. Box 700
FIN-65101 Vaasa, FI-65101
Finland
+358 6 3248 268 (Phone)

Jussi Nikkinen

University of Vaasa - Department of Accounting and Finance ( email )

P.O. Box 700
FIN-65101 Vaasa, FI-65101
Finland
+358 6 3248541 (Phone)

Sami Vähämaa (Contact Author)

University of Vaasa ( email )

P.O. Box 700
Vaasa, FI-65101
Finland
+358 29 449 8455 (Phone)

HOME PAGE: http://www.uva.fi/~sami

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