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Determinants and Effects of Countries’ External Capital Structure: A Firm-Level Analysis
Author:
Uroš Herman
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Tobias Krahnke
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Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 038
Language:
English
Publication Date:
18 Feb 2022
DOI:
https://doi.org/10.5089/9798400200984.001
ISBN:
9798400200984
ISSN:
1018-5941
Pages:
40
Keywords:
External Liabilities; Foreign Direct Investment; Firm-level data; Financial Crisis; equity share; firm's composition; firm-level data; sales growth; standard deviation; Foreign liabilities; Foreign corporations; Global financial crisis of 2008-2009; Foreign direct investment; Corporate sector; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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In this paper, we investigate whether a firm’s composition of foreign liabilities matters for their resilience during economic turmoil and examine which characteristics determine a firm’s foreign capital structure. Using firm-level data, we corroborate previous findings from the (international) macroeconomic literature that the composition of foreign liabilities matters for a country’s susceptibility to external shocks. We find that firms with a positive equity share in their foreign liabilities were less affected by the global financial crisis and also less likely to default in the aftermath of the crisis. In addition, we show that larger, more open, and more productive firms tend to have a higher equity share in total foreign liabilities.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund