Debt Structure and Corporate Performance in Emerging Markets

Research in International Business and Finance Vol 38. pp. 299-311, 2016

31 Pages Posted: 20 Jan 2015 Last revised: 16 May 2016

See all articles by Denis Davydov

Denis Davydov

University of Vaasa - Department of Accounting and Finance

Date Written: February 22, 2016

Abstract

This paper examines the effects of public and bank debt financing on firm performance in emerging markets. Using data on 700 publicly traded firms from the BRIC countries, it is documented that bank debt may have a positive effect on firm profitability. While overall market assessment of bank debt financing is negative, it is found that fully bank-financed firms lose less of their market value. Main findings remain unchanged after addressing potential endogeneity issues by introducing a novel instrumental variable. Overall, the results suggest that higher levels of bank financing may have positive effects on firm profitability and market valuation.

Keywords: debt financing, bank debt, firm performance, emerging markets

JEL Classification: G15, G30, G32

Suggested Citation

Davydov, Denis, Debt Structure and Corporate Performance in Emerging Markets (February 22, 2016). Research in International Business and Finance Vol 38. pp. 299-311, 2016. Available at SSRN: https://ssrn.com/abstract=2551791 or http://dx.doi.org/10.2139/ssrn.2551791

Denis Davydov (Contact Author)

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

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

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