Global Corporate Debt during Crises : Implications of Switching Borrowing across Markets
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. Using data on worldwide debt issuance from advanced and emerging e...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/105021580999161805/Global-Corporate-Debt-during-Crises-Implications-of-Switching-Borrowing-across-Markets http://hdl.handle.net/10986/33318 |
| Summary: | 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. 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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