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Rising corporate debt and value relevance of supply-side factors in South Africa

Michael Machokoto (), Geofry Areneke and Boulis Maher Ibrahim

Journal of Business Research, 2020, vol. 109, issue C, 26-37

Abstract: Motivated by the recent discovery of a significant increase in corporate debt in developed countries, we use a large sample of 775 listed companies to examine the dynamics and determinants of South African corporate debt. We find an 89% increase in the leverage of the average firm, from 11% in 1990 to 21% in 2015. Long-term and short-term debt increased by 103% and 67%, respectively. We find that this increase is pervasive, and cannot be explained entirely by either firm attributes or macroeconomic factors, despite the importance of the latter. Instead, we find supply-side factors to be the main determinants of the upward trend in corporate debt, highlighting their importance to corporate debt policies in emerging economies.

Keywords: Corporate debt; Supply-side factors; Demand-side factors; Financial constraints; Emerging markets (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:109:y:2020:i:c:p:26-37

DOI: 10.1016/j.jbusres.2019.11.039

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