This paper studies how crises prompted firms to switch borrowing across markets, impacting the amount borrowed, maturity, and currency denomination at the firm and aggregate levels.
... See More + Using data on worldwide debt issuance from advanced and emerging economies, the paper shows that firms shifted their issuances between domestic and international syndicated loans and corporate bonds during financial crises. Firms reduced their borrowing in shock-hit markets but increased it in other debt markets. Firms also moved toward longer-term markets, maintaining (or even increasing) their borrowing maturity. As they moved toward domestic markets during international crises, firms reduced the share of foreign currency debt. The opposite occurred during domestic crises. Large firms were the ones that switched between international and domestic markets, affecting aggregate capital raising activity. The analysis of four distinct markets generates patterns consistent with credit supply shocks that are different from those obtained when studying the dynamics of individual markets.
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Policy Research Working Paper WPS9142 FEB 06, 2020
During the past decades, firms from emerging economies have significantly increased the amount of financing obtained in capital markets. Whereas the literature argues that international markets have been an important contributor to this process, the role of domestic markets is mostly unknown.
... See More + By examining the case of East Asia, this paper shows that domestic markets have been a key driver of the observed trends in capital market financing since the early 2000s. As domestic markets developed, more and smaller firms gained access to equity and corporate bond financing. Domestic markets also helped some corporations to diversify funding sources and obtain domestic currency financing. Policy reforms following the Asian Financial Crisis accompanied the growth of domestic markets. Part of the reforms were aimed at developing domestic capital markets for small and medium-size enterprises. Although these markets have developed significantly, they still serve relatively few corporations, albeit from new sectors.
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During the past decades, firms from emerging economies have significantly increased the amount of financing obtained in capital markets. Whereas the literature argues that international markets have been an important contributor to this process, the role of domestic markets is mostly unknown.
... See More + By examining the case of East Asia, this paper shows that domestic markets have been a key driver of the observed trends in capital market financing since the early 2000s. As domestic markets developed, more and smaller firms gained access to equity and corporate bond financing. Domestic markets also helped some corporations to diversify funding sources and obtain domestic currency financing. Policy reforms following the Asian Financial Crisis accompanied the growth of domestic markets. Part of the reforms were aimed at developing domestic capital markets for small and medium-size enterprises. Although these markets have developed significantly, they still serve relatively few corporations, albeit from new sectors.
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Policy Research Working Paper WPS8844 MAY 07, 2019
It is generally believed that firms in emerging markets rely on shorter-term instruments than firms in advanced economies. In recent years, firms in emerging market economies have substantially increased the amount of debt raised in global bond and syndicated loan markets, triggering concerns about their exposure to rollover risks.
... See More + However, new evidence examined in this policy brief shows that emerging market firms have been using these markets to borrow long term, possibly diminishing the risks associated with higher debt levels and foreign currency financing. Challenging the conventional wisdom, large firms from emerging markets have issued bonds and syndicated loans at maturities similar to those issued by firms from advanced economies. These findings have implications for understanding the sources of short-termism in emerging markets, the actual risks emerging economies face from rising levels of corporate borrowing, and the policy measures that may help firms that cannot borrow long term.
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The period since the global financial crisis of 2008 has been characterized by the emergence of a broad set of tech-driven financial companies ("fintech" companies), acting in parallel with traditional banking services.
... See More + Although the new players are ramping up competition, pushing digital transformation and exerting pressure on the global financial sector, their services appear to be highly complementary to the ones provided by the more established banks, which are also embracing these technologies.
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This paper documents to what extent firms from developing countries borrow short versus long term, using data on corporate bond and syndicated loan markets.
... See More + Contrary to claims in the literature based on firm balance sheets, firms from developing countries borrow through bonds and syndicated loans at maturities similar to those obtained by developed country firms. The composition and use of financing matters. Firms from developing countries borrow shorter term in domestic bond markets, but the differences in international issuances (accounting for most of the proceeds) are significantly smaller. Developing country firms borrow longer term in syndicated loan markets, which they partially use for infrastructure projects. However, only large firms from developing countries (similar in size to those from developed ones) issue bonds and syndicated loans. The short-termism in developing countries is partly explained by a lower proportion of firms using these markets, with more firms relying on other shorter-term instruments.
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Policy Research Working Paper WPS8222 OCT 19, 2017
This paper studies how access to different markets and crises impact debt financing and maturity. Using data on worldwide corporate issuance activity in domestic and international bond and syndicated loan markets during 1991-2014, the paper shows that these markets are affected differently by crises, while providing financing to different firms at distinct maturities.
... See More + During the global financial crisis and domestic banking crises, large firms moved away from the crisis-hit markets toward less affected, longer-term ones, switching their financing sources. Hence, firms that switched markets compensated for the financing shocks and maintained, or increased, their borrowing maturity. Country-level maturities also remained stable or even lengthened. However, firms that did not move across markets typically experienced declining financing and shorter borrowing maturities. Firm movements across markets are consistent with credit tightening during crises due to supply-side shocks, significantly affecting debt composition, borrowing maturity, and credit redistribution across firms of different sizes.
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Policy Research Working Paper WPS7815 SEP 08, 2016
This paper documents how firms in Arab countries issue equity, corporate bonds, and syndicated loans in domestic and international markets to obtain financing and grow.
... See More + Using a new data set on issuance activity and firm performance, the paper finds that capital raising through these markets has grown rapidly since the early 1990s and involved an increasing number of issuing firms. Whereas the amounts raised (relative to gross domestic product) in equity and loan markets stand well with respect to international standards, bond issuance activity lags behind. Yet, bond financing has gained importance over time. Equity issuances primarily take place domestically, while bonds and loans are mostly issued internationally, display long maturities, and entail low levels of credit risk. Issuing firms are larger, grow faster, and are more leveraged than non-issuers. While issuers tend to be larger ex ante than non-issuers, the size gap between them seems to widen over time.
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Policy Research Working Paper WPS7756 JUL 20, 2016
Cortina Lorente,Juan Jose; Ismail,Soha Ismail Ahmed Aly; Schmukler,Sergio L.Disclosed
