Financial Market Constraints and Private Investment in a Developing Country

Omotunde Johnson

No 1990/121, IMF Working Papers from International Monetary Fund

Abstract: Firms in developing countries that seek outside financing for investment must often choose their debt-equity combinations in the face of financial market constraints on debt service, on outside equity financing, and on internal finance (endowments). Inefficiencies in the allocation of available finance and in the equity-debt choices that can ensue can be prevented by appropriate policy measures to improve information on profitable investment opportunities and about firms; to directly strengthen financial intermediation; and to support appropriate credit guarantee schemes.

Keywords: WP; debt service; interest rate; rate of return (search for similar items in EconPapers)
Pages: 31
Date: 1990-12-01
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