This study investigates whether and how financial development shapes the corporate asset structure using firm-level data consisting of 47 countries over the period 1991-2010. Two asset items vary systematically with financial development (as measured by the size of a country’s financial market relative to GDP). First, cash reserves increase monotonically with financial development. Contrary to the precautionary savings hypothesis, firms in financially undeveloped countries hold relatively small cash reserves. Firms in those countries appear to be cash-strapped, as they use a significant fraction of cash flow to repay short-term debt. Second, tangible assets (denoted by PP&E) decrease, but intangible assets (denoted by non-PP&E) increase, with financial development. As the level of financial development increases, firm value reflects less of anticipated investments in PP&E and more of anticipated investments in non-PP&E. Overall, the stock market development plays a greater role than the debt market development does in shaping corporate financial policy. For example, as financial markets grow in size, firms use increasingly more external equity to finance investments, while their use of debt does not increase.
JEL classification: G31, G32, G20
Key words: financial development, investment financing, cash holdings, intangible assets, financial constraints, capital structure
학회소식
[2016년 제 1차] Financial Development and Asset Structure: A Cross-
작성자 : 관리자
조회수 : 852
게시일 :
2016-03-02
