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Does the decision to issue public debt affect firm valuation? Russian evidence

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  • Davydov, Denis
  • Nikkinen, Jussi
  • Vähämaa, Sami

Abstract

This paper examines the association between firm valuation and the sources of debt financing. In particular, using a sample of 353 firms, we test whether the decision to issue bonds affects the firm's stock market performance in the emerging Russian markets. Our results indicate that public debt financing may have a negative effect on the firm's market valuation. After controlling for the differences in firm-specific characteristics and addressing potential endogeneity issues, we document that the firms which rely on public debt underperform relative to firms with other sources of debt financing in terms of stock market valuation.

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  • Davydov, Denis & Nikkinen, Jussi & Vähämaa, Sami, 2014. "Does the decision to issue public debt affect firm valuation? Russian evidence," Emerging Markets Review, Elsevier, vol. 20(C), pages 136-151.
    • Handle: RePEc:eee:ememar:v:20:y:2014:i:c:p:136-151
    DOI: 10.1016/j.ememar.2014.06.004
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    More about this item

    Keywords

    Debt financing; Bonds; Firm valuation; Firm performance; Emerging markets;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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