Determinants and Effects of Countries’ External Capital Structure: A Firm-Level Analysis

February 18, 2022

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Uroš Herman, and Tobias Krahnke. Determinants and Effects of Countries’ External Capital Structure: A Firm-Level Analysis, (USA: International Monetary Fund, 2022) accessed November 21, 2024

Disclaimer: 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.

Summary

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.

Subject: Balance of payments, Corporate sector, Economic sectors, External position, Financial crises, Foreign corporations, Foreign direct investment, Foreign liabilities, Global financial crisis of 2008-2009

Keywords: Corporate sector, Equity share, External Liabilities, Financial Crisis, Firm-level data, Firm-level data, Firm's composition, Foreign corporations, Foreign direct investment, Foreign Direct Investment, Foreign liabilities, Global, Global financial crisis of 2008-2009, Sales growth, Standard deviation

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/038
Stock No:

WPIEA2022038
ISBN:

9798400200984
ISSN:

1018-5941

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