The zero-debt puzzle in BRICS countries: Disentangling the financial flexibility and financial constraints hypotheses

Paolo Saona, Pablo San-Martin and Eleuterio Vallelado

Emerging Markets Review, 2024, vol. 61, issue C

Abstract: This study analyzes the zero-debt decisions of BRICS firms using a bivariate probit model. The leading hypotheses are financial flexibility and financial constraints. On the demand-side, our findings reveal that managerial debt aversion, early lifecycle stage, growth opportunities, solvency, and concentrated ownership contribute to the lack of debt. Similarly, a country's institutional quality correlates with firms' debt-free status. On the supply-side, creditors fund companies with poor financial records in countries with robust markets and economic freedom. Financial flexibility and restrictions leading to zero debt are linked to firm and institutional characteristics in emerging countries.

Keywords: Zero leverage; BRICS; Financial flexibility; Financial restrictions; Capital structure; Bivariate probit model (search for similar items in EconPapers)
JEL-codes: G14 G32 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:61:y:2024:i:c:s156601412400058x

DOI: 10.1016/j.ememar.2024.101163

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