Shocks to the cost of borrowing and capital structure
Vicente Cuñat () and
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
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
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