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Corporate Debt Mix and Long-term Firm Growth in Japan

Author

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  • Yongkil Ahn
  • Yoshikatsu Shinozawa
  • Kazuo Yamada

Abstract

This paper examines how firms change debt financing channels in line with the development of financial markets. In this aim, a data set of Japanese listed firms from 1965 (with more than 10% of annual GDP growth) to 2015 (almost 0% GDP growth) is used. We find a long-term change in the debt mix from internal debt financing (e.g., trade credits) to external debt financing (e.g., public bonds). Furthermore, we document that the firm growth rate is positively related to bond financing and negatively associated with trade credits. These associations are not conditional on interlocking business relationships with Keiretsu. The findings imply that the role of established firms’ internal financing channels diminishes as financial markets develop along with economic growth.

Suggested Citation

  • Yongkil Ahn & Yoshikatsu Shinozawa & Kazuo Yamada, 2022. "Corporate Debt Mix and Long-term Firm Growth in Japan," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(8), pages 2139-2152, June.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:8:p:2139-2152
    DOI: 10.1080/1540496X.2021.1961739
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