Leverage and the maturity structure of debt in emerging markets

C Mateus, PRS Terra - … of mathematical finance. California. Vol. 3, n …, 2013 - lume.ufrgs.br
Journal of mathematical finance. California. Vol. 3, n. 3A (Oct. 2013), p …, 2013lume.ufrgs.br
The aim of this paper is to analyse for a multi-country large emerging market sample the
choice between debt and equity simultaneously with the decision between short-and long-
term debts. In order to investigate the joint decision among leverage and maturity, we
examine an unique sample of 986 firms and 13,490 firm-year observations from Latin
America and 686 firms and 7919 firm-year observations from Eastern Europe for the period
1990-2003. We employ dynamic panel data analysis using Generalized Method of …
The aim of this paper is to analyse for a multi-country large emerging market sample the choice between debt and equity simultaneously with the decision between short- and long-term debts. In order to investigate the joint decision among leverage and maturity, we examine an unique sample of 986 firms and 13,490 firm-year observations from Latin America and 686 firms and 7919 firm-year observations from Eastern Europe for the period 1990-2003. We employ dynamic panel data analysis using Generalized Method of moments. The empirical results support three main findings. First, the cross-effects between leverage and maturity behave exactly the opposite between Latin America and Eastern Europe sub-samples. Capital structure and debt maturity are policy complements in Latin America and substitutes in Eastern Europe. Second, there is a significant dynamic effects component in the determination of leverage and maturity. Finally, adjustment to the target maturity is by no means costless and instantaneous with firm facing moderate adjustment costs.
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