Capital Structure, Rates of Return and Financing Corporate Growth: Comparing Developed and Emerging Markets, 1994-2000
35 Pages Posted: 1 May 2003
Date Written: March 17, 2003
Abstract: Firm level data from financial statements for nearly 8,000 listed companies in 22 emerging and 22 developed countries over the period 1994-00 are examined. Capital structure, asset structure, rates of return and financing patterns are compared across countries and over time. In emerging markets (EM) the ratio of debt to total assets and the ratio of current assets to total assets is lower than in developed markets (DM). EM companies employ higher levels of fixed assets (relative to total assets) than do DM companies. Returns on assets, after adjusting for local inflation, are statistically and economically less in EM than in DM countries, especially in the early years of the sample. Country effects are more important than sector effects in explaining cross-firm variation in the variables, but individual firm effects account for most of the variation.
Keywords: Capital structure, rates of return, emerging markets
JEL Classification: F3, G3
Suggested Citation: Suggested Citation