Corporate borrowing : currency denomination, debt maturity and institutional quality : evidence from emerging markets

• Main Author: Said, Yasmeen Hany
• Published: University of Nottingham 2018
• Subjects: HG Finance
• Online Access: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.757426

This thesis consists of 3 empirical papers examining the capital structure and debt maturity determinants from a developing economy perspective. Chapters 1 and 2 focus on firm-level determinants of local currency and foreign currency borrowing in South Korea over the period 1990 - 2006, which includes the 1997-1998 Asian financial crisis. Chapter 3 conducts a cross-country analysis using a dataset from the Middle East and Africa region (MEA hereafter) to study the firm level and institutional environment effects on debt maturity choices. The first chapter uses capital structure theories to investigate whether there are common factors affecting both foreign and domestic currency denominated debt in South Korea. The dataset used includes 18,827 observations for 4017 listed and unlisted manufacturing firms. As not all firms have both types of debt (local and foreign), our debt ratios dependent variables contain a good proportion of zero values, which motivates the use of the random effects Tobit model. We find that firm size, profitability, liquidity, asset tangibility, and leverage are common determinants for foreign and local currency borrowing including. We also find that the effect of certain capital structure determinants changed from one period to another. The second chapter examines the determinants of foreign currency corporate debt maturity in South Korea. The chapter relies on both debt maturity and foreign currency debt theories. The data set includes 4,066 manufacturing firms observed over the period 1990-2006. Since the debt maturity dependent variable contains a large proportion of zeros due to the fact that many firms do not have long-term debt, the random effects Tobit model is utilized. Our findings suggest that debt maturity decisions of Korean firms are dependent on firm-specific variables, which lend support to both debt maturity and foreign currency debt theories. The third chapter uses insight from institutional theories to examine the influence of institutional quality on corporate debt maturity choices in the MEA region. The dataset covers annual information for 1,163 firms from 21countries observed over the period 2006-2014. We separate the Arab Spring countries from the rest of the MEA countries to test whether institutional quality has a different effect on debt maturity structure given the cross-country corporate environment variations. Our random effects Tobit model results suggest that elements of countries institutional environment and lending infrastructure prove influential to the debt maturity choices for the MEA region firms.