How Does Long-Term Finance Affect Economic Volatility?
This paper examines how the ability to access long-term debt affects firm-level growth volatility. The analysis finds that firms in industries with stronger preference to use long-term finance relative to short-term finance experience lower growth...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/01/25801185/long-term-finance-affect-economic-volatility http://hdl.handle.net/10986/23703 |
| Summary: | This paper examines how the ability to
access long-term debt affects firm-level growth volatility.
The analysis finds that firms in industries with stronger
preference to use long-term finance relative to short-term
finance experience lower growth volatility in countries with
better-developed financial systems, as these firms may
benefit from reduced refinancing risk. Institutions that
facilitate the availability of credit information and
contract enforcement mitigate the refinancing risk and
therefore growth volatility associated with short-term
financing. Increased availability of long-term finance
reduces growth volatility in crisis as well as non-crisis periods. |
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