Shocks to the cost of borrowing and capital structure

Vicente Cuñat and Claudio Gonzalez-Iturriaga

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We use the imposition of a non remunerated reserve on short term borrowing in Chile in 1991 as a cuasi natural experiment to test the effects of an increase in the cost of short term borrowing on capital structure and investment. The differential impact of this regulatory measure across firms allows us to perform a difference in differences analysis. We find a drastic drop in short term borrowing of regulated firms that was almost completely offset by additional long term borrowing. The nature of the experiment allows us to isolate a clear causality from changes in the cost of funds to capital structure, solving some of the endogeneity problems present in preexisting literature.

JEL-codes: F3 G3 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2005-07-14
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://eprints.lse.ac.uk/43165/ Open access version. (application/pdf)

Related works:
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:ehl:lserod:43165

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager (lseresearchonline@lse.ac.uk).