TY - JOUR
T1 - Debt composition and balance sheet effects of exchange rate depreciations
T2 - A firm-level analysis for Chile
AU - Benavente, José Miguel
AU - Johnson, Christian A.
AU - Morandé, Felipe G.
PY - 2003/12
Y1 - 2003/12
N2 - By studying the behavior of foreign currency borrowing, maturity, sales and the investment decisions of firms listed in the Chilean Stock Exchange from 1994 to 2001, this paper assesses whether in the aftermath of the Asian crisis of the late 1990s the depreciation of the local currency (Chilean peso) affected these firms' real and financial decisions. At issue is the contrast between a negative net-worth effect and a potential expansionary competitiveness effect for the tradable sector. We find that there exists little evidence that devaluations cause a positive impact on investment and sales for firms with dollar denominated debt. The maturity structure of Chilean firms is mainly explained by the size of the companies. Large firms will have a debt structure biased to higher maturities. Analyzing dollar denominated debt composition the evidence shows that larger firms maintained a higher proportion of dollar denominated debt reflecting the development of the financial sector in Chile.
AB - By studying the behavior of foreign currency borrowing, maturity, sales and the investment decisions of firms listed in the Chilean Stock Exchange from 1994 to 2001, this paper assesses whether in the aftermath of the Asian crisis of the late 1990s the depreciation of the local currency (Chilean peso) affected these firms' real and financial decisions. At issue is the contrast between a negative net-worth effect and a potential expansionary competitiveness effect for the tradable sector. We find that there exists little evidence that devaluations cause a positive impact on investment and sales for firms with dollar denominated debt. The maturity structure of Chilean firms is mainly explained by the size of the companies. Large firms will have a debt structure biased to higher maturities. Analyzing dollar denominated debt composition the evidence shows that larger firms maintained a higher proportion of dollar denominated debt reflecting the development of the financial sector in Chile.
KW - Balance sheet effects
KW - Debt composition and maturity
KW - Panel data
UR - http://www.scopus.com/inward/record.url?scp=0344702679&partnerID=8YFLogxK
U2 - 10.1016/S1566-0141(03)00062-1
DO - 10.1016/S1566-0141(03)00062-1
M3 - Article
AN - SCOPUS:0344702679
SN - 1566-0141
VL - 4
SP - 397
EP - 416
JO - Emerging Markets Review
JF - Emerging Markets Review
IS - 4
ER -