Determinants and Effects of Countries’ External Capital Structure: A Firm-Level Analysis

Uros Herman () and Tobias Krahnke

No 2022/038, IMF Working Papers from International Monetary Fund

Abstract: In this paper, we investigate whether a firm’s composition of foreign liabilities matters for their resilience during economic turmoil and examine which characteristics determine a firm’s foreign capital structure. Using firm-level data, we corroborate previous findings from the (international) macroeconomic literature that the composition of foreign liabilities matters for a country’s susceptibility to external shocks. We find that firms with a positive equity share in their foreign liabilities were less affected by the global financial crisis and also less likely to default in the aftermath of the crisis. In addition, we show that larger, more open, and more productive firms tend to have a higher equity share in total foreign liabilities.

Keywords: External Liabilities; Foreign Direct Investment; Firm-level data; Financial Crisis; equity share; firm's composition; firm-level data; sales growth; standard deviation; Foreign liabilities; Foreign corporations; Global financial crisis of 2008-2009; Foreign direct investment; Corporate sector; Global (search for similar items in EconPapers)
Pages: 40
Date: 2022-02-18
New Economics Papers: this item is included in nep-fdg
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