Jul 2026· IMF Working Papers· Vol 2026, pp. 1· 0 citations
Abstract
We examine market entry and post-entry debt dynamics in Frontier Economies by grouping countries based on durability of market access using a two-step framework combining first Eurobond issuance with the reliance on private external creditors, validated through an unsupervised K-mean clustering. A discrete-time event LOGIT model finds that favorable global liquidity conditions and investor appetite open issuance windows for countries, but domestic pull factors—income, institutions, growth, and reserve buffers—ultimately determine success of market entry. Post-entry, Frontier Economies shift rapidly toward market borrowing, with looser fiscal stance as new financing source is unlocked. Along increased exposure to rollover and global financial cycle risks, debt decomposition exercise shows a worsening interest–growth differential and rising debt, driven mainly by primary deficits and higher interest burdens. Results underscore the need for credible medium-term fiscal frameworks, stronger debt management, and reserve buffers to manage the transition to market financing.
This study examines the effect of bank competition on corporate investment-financing maturity mismatch, utilizing a panel dataset of 498 listed firms in Vietnam from 2008 to 2024. Bank competition is measured using both structural and non-structural indicators, allowing for a nuanced assessment of market dynamics. The findings reveal a robust positive association between bank competition and maturity mismatch, suggesting that intensified competition leads firms to increase their reliance on short-term debt relative to long-term investment needs. This relationship holds under multiple robustness checks, including alternative variable constructions, fixed effects specifications, crisis period exclusions, and instrumental variable approaches. Mechanism analyses indicate that bank competition affects firms’ debt maturity structures, increasing both the proportion and scale of short-term borrowing. Heterogeneity tests further show that this effect is stronger among firms with higher bank debt dependence, greater financial constraints, and higher borrowing costs, while it is weaker in capital-intensive sectors.
Thi Minh Hue Phan, Japan Huynh· PLoS ONE· 0 citations
This study examines the moderating role of liquidity in the relationship between extreme capital structure and firm performance among listed firms in emerging markets. It is motivated by the need to better understand how financing constraints and liquidity management influence firm performance in environments characterised by high financial frictions and limited access to external capital. Extreme capital structure is defined as firms maintaining very low levels of debt, measured using thresholds of 1% (ultra-low debt) and 5% for both long-term debt and total debt. The analysis is based on a panel dataset of non-financial listed firms over the period 2006–2024 and employs a dynamic panel System Generalised Method of Moments (System GMM) complemented by a Random Effects model for robustness. Empirical results indicate that liquidity has a meaningful and predominantly positive moderating effect. This is observed when firms maintain extremely low long-term debt (1% threshold) and low long-term debt (5% threshold). Liquidity enhances firm performance. This effect is strongest for return on assets (ROA) and return on equity (ROE). The effect on Tobin’s Q is weaker but remains generally positive. These findings highlight the strategic importance of liquidity in improving profitability and financial resilience under conservative financing structures. However, the findings are limited to listed non-financial firms in emerging markets and may not be generalizable to SMEs or unlisted firms. Future research could explore the threshold at which liquidity ceases to generate benefits or begins to produce diminishing returns in ultra-low leverage contexts.
Owen Ncube, G. Marozva· International Journal of Fin...· 0 citations
With exchange rate volatility becoming increasingly pronounced, managing currency exposure has become a central component of corporate decision-making. This paper investigates the link between foreign exchange (FX) uncertainty and technological advancement, using data from Chinese A-share listed firms (2013–2023). We find that higher FX exposure is associated with significantly lower patent output. This negative relationship remains robust to alternative variable definitions, alternative rolling-window lengths and lag specifications, and instrumental variable (IV) approaches. Mechanism tests reveal that financial constraints serve as an important transmission channel: FX volatility elevates the external finance premium and reduces internal liquidity, thereby crowding out R&D investments. Cross-sectional analyses indicate that this crowding-out effect is more pronounced among non-state-owned enterprises (non-SOEs) and firms with foreign revenue exposure. Our findings provide empirical evidence on the real effects of macroeconomic FX shocks and offer implications for FX expectation management and structural monetary policies.
Shang Tai· Advances in Economics and Ma...· 0 citations
We examine the determinants of capital structure for S&P 500 firms over the recent 25 years from 2000 to 2024. Using both traditional regression models and machine-learning approaches, we investigate how firm fundamentals and macroeconomic conditions jointly shape firms’ leverage decisions. Across several empirical methods, including OLS, Lasso, Ridge, Random Forest, and Gradient Boosting, we find that operating profitability, tax-shield benefits, and earnings volatility consistently emerge as the most important determinants of leverage. Firms with higher profitability rely less on external financing, while tax incentives or greater internal cash flow uncertainty can result in the use of more debt. Nonlinear models further highlight liquidity as an important predictor, suggesting that internal cashflow buffers reduce reliance on external financing. At the macro level, GDP growth is negatively associated with leverage, consistent with firms deleveraging during economic expansions. Overall, our findings suggest that firm-specific characteristics play a dominant role in shaping capital structure decisions, while macroeconomic conditions exert a secondary but meaningful influence.
C. N. V. Krishnan, Yue Lang· Journal of finance issues· 0 citations
Using 53,121 U.S. firm-year observations from 1989 through 2024, I estimate target cash holdings and leverage ratios and measure deviations from these targets as excess cash and excess debt capacity, respectively, for internationally diversified firms. I find that internationally diversified firms hold significantly higher excess cash and excess debt capacity than domestic firms, consistent with greater information asymmetry and weaker external monitoring. More importantly, internationally diversified firms adjust more slowly toward their target cash and leverage levels. This effect is mitigated by product market competition, and the results are robust to an instrumental-variable approach addressing the endogeneity of diversification. Overall, my findings suggest that international diversification impedes firms' ability to adjust toward optimal financial policies, with implications for capital structure and liquidity management in multinational firms.
Faezeh Alirezvani· Journal of Economics, Financ...· 0 citations
Capital structure research began with a deceptively simple question: does the division of financing between debt and equity change firm value? The literature gradually widened that question by adding taxes, bankruptcy costs, agency conflicts, private information, market timing, adjustment costs, national institutions, managerial traits, debt design, and intangible capital. This narrative review examines how those additions changed both theory and practice. It draws on influential foundational papers and selected empirical studies from developed and emerging economies. The evidence does not identify one theory that explains every firm or period. Instead, leverage reflects several forces whose importance varies with cash-flow stability, assets, investment opportunities, access to lenders, institutional conditions, and managerial judgment. Recent work places particular emphasis on maturity, covenants, refinancing risk, unused borrowing capacity, and the ability to finance future investment. The review concludes that capital structure has shifted from a largely static search for one optimal debt ratio toward an adaptive financing policy. Classical theories remain useful, but their insights are now applied within a broader concern for resilience and financial flexibility.
Hasnat Karim· International Journal of Adv...· 0 citations