Business, Management and Accounting
4 years ago

Latin American firms face stronger financial constraints post-crisis, favoring big corporations.

RePEc: Research Papers in Economics
Corporate Leverage, the Cost of Capital,and the Financial Crisis in Latin America
Ricardo Bebczuk, Arturo Galindo

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The study looked at data from 185 companies in Latin America from 1993 to 2009. They found that companies with more assets, larger size, and higher market value tend to have more debt. Profitability, however, is linked to lower debt levels. The cost of debt is lower for bigger companies and those with more assets, but higher for profitable companies. The financial crisis didn't affect these companies much, but it did change how debt and company characteristics are related. During the crisis, bigger companies with more assets and higher profitability were favored by investors.