Balance sheet and currency mismatch: evidence for Peruvian firms

Nelson R. Ramírez-Rondán

Empirical Economics, 2019, vol. 57, issue 2, No 4, 449-473

Abstract: Abstract In the Peruvian economy, as in other emerging economies, a significant portion of the debt held by firms is denominated in US dollars. While an exchange rate depreciation is likely to increase firm debt and influence investment and production plans, the literature finds weak or no evidence of this balance sheet effect. In this paper, I argue that this effect is observed in firms with a significant currency mismatch. I estimate the currency mismatch (defined as assets minus liabilities in US dollars and expressed as a percentage of total assets in domestic currency) from which the exchange rate has negative effects on firms’ investment. Using financial information from 74 non-financial Peruvian firms from 2002 to 2014, I find significant balance sheet effects for firms with a currency mismatch below − 10.4%.

Keywords: Balance sheet; Dollar debt; Peru (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s00181-018-1459-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Balance Sheet and Currency Mismatch: Evidence for Peruvian Firms (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:empeco:v:57:y:2019:i:2:d:10.1007_s00181-018-1459-y

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-018-1459-y

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().