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Debt structure and corporate performance in emerging markets

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  • Davydov, Denis

Abstract

This paper examines the effects of public and bank debt financing on firm performance in emerging markets. Using data on 700 publicly traded firms from the BRIC countries, it is documented that bank debt may have a positive effect on firm profitability. While overall market assessment of bank debt financing is negative, it is found that fully bank-financed firms lose less of their market value. Main findings remain unchanged after addressing potential endogeneity issues by introducing a novel instrumental variable. Overall, the results suggest that higher levels of bank financing may have positive effects on firm profitability and market valuation.

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  • Davydov, Denis, 2016. "Debt structure and corporate performance in emerging markets," Research in International Business and Finance, Elsevier, vol. 38(C), pages 299-311.
    • Handle: RePEc:eee:riibaf:v:38:y:2016:i:c:p:299-311
    DOI: 10.1016/j.ribaf.2016.04.005
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    More about this item

    Keywords

    Debt financing; Bank debt; Firm performance; Emerging markets;
    All these keywords.

    JEL classification:

    • 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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