Globalization and Firms' Financing Choices: Evidence from Emerging Economies

37 Pages Posted: 12 Jun 2000

See all articles by Sergio L. Schmukler

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Esteban Vesperoni

International Monetary Fund (IMF); University of Maryland, College Park

Multiple version iconThere are 2 versions of this paper

Date Written: May 2001


Debt-equity ratios do not tend to increase after financial liberalization, but there is a shift from long-term to short-term debt. Globalization has uneven effects for firms with and without access to international capital markets. Countries with deeper domestic financial markets are less affected by financial liberalization.

Schmukler and Vesperoni investigate whether integration with global markets affects the financing choices of firms from East Asia and Latin America. Using firm-level data for the 1980s and 1990s, they study how leverage ratios, the structure of debt maturity, and sources of financing change when economies are liberalized and when firms gain access to international equity and bond markets.

The evidence shows that integration with world financial markets has uneven effects.

On the one hand, debt maturity for the average firm shortens when countries undertake financial liberalization.

On the other hand, domestic firms that actually participate in international markets get better financing opportunities and extend their debt maturity.

Moreover, firms in economies with deeper domestic financial systems are affected less by financial liberalization.

Finally, they show that leverage ratios increase during times of crisis.

In an appendix, they analyze the previously unstudied case of Argentina, which experienced sharp financial liberalization and was hit hard by all recent global crises.

This paper - a product of Macroeconomics and Growth, Development Reseach Group - is part of a larger effort in the group to understand financial development and financial integration. The authors may be contacted at or

JEL Classification: F3, G1, G3

Suggested Citation

Schmukler, Sergio and Vesperoni, Esteban Rodrigo, Globalization and Firms' Financing Choices: Evidence from Emerging Economies (May 2001). Available at SSRN:

Sergio Schmukler (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN MC 3-301
Washington, DC 20433
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202-458-4167 (Phone)
202-522-3518 (Fax)


Esteban Rodrigo Vesperoni

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

University of Maryland, College Park ( email )

College Park, MD 20742
United States

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