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Debt structure and corporate performance in emerging markets

Denis Davydov

Research in International Business and Finance, 2016, vol. 38, issue C, 299-311

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 (search for similar items in EconPapers)
JEL-codes: G15 G30 G32 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:eee:riibaf:v:38:y:2016:i:c:p:299-311