Financial liberalization and firms’ capital structure adjustments

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1、JEconFinanDOI10.1007/s12197-010-9158-3Financialliberalizationandfirms’capitalstructureadjustmentsevidencefromSoutheastAsiaandSouthAmericaRashidAmeer#SpringerScience+BusinessMedia,LLC2010AbstractThispaperinvestigatestheimpactoffinancialliberalizationontheadjustmentofdebtratiosin12emergingmarket

2、susingfirm-leveldatafrom1991to2004.Theresultssupportthecentralhypothesisofthispaperthatadjustmentcostsareimportantinexplainingfirms’adjustmenttowardtheirdebtratiotargets.Ourresultsshowthatdeviationsfromtargetsarehalvedwithin1.09yearsinSouthAmericaand1.19yearsinSoutheastAsia,suggestingspeedofad

3、justmentisrelativelyfasterinSouthAmericancountriesthanSoutheastAsiancountries.Furthermore,ourresultsshowthatafterfullliberalizationthosecountrieswhereruleoflawandcreditorsrightswereproperlyenforced,firmshadhigheradjustmentspeedcomparedtothosecountrieswheresuchenforcementwasnotpresent.Theestima

4、tedadjustmentcoefficientsimplythatonaveragefirms’adjustmentspeedshaveincreasedinallSouthAmericancountriesovertheperiodoffinancialliberalization.Onthecontrary,firms’adjustmentspeedsdidnotincreaseinSoutheastAsiancountries,reflectingtheuneveneffectofliberalizationonthefirms’financingbehaviourinAs

5、iancountries.Therewasasignificantreductionintime(inyears)takentohalfthegapbetweenactualdebtratiosandtargetsonlyinPakistanandSouthKorea.Thisfindingsupportstheideaofuncertainimpactoffinancialliberalizationprogramsonthedomesticfinancialmarketsinthoseemergingmarketswhichstartedopeninguptheirmarket

6、andintegratingwiththerestoftheworldlatterthanothers.Thesefindingshavesignificantimplicationsforthesequenceofbankingsectorliberalizationintheemergingmarkets.KeywordsFinancialLiberalization.CapitalStructure.EmergingMarkets.PartialAdjustmentModelJELClassificationD53.O12.O16.O57R.Ameer(*)Accountin

7、gResearchInstitute,FacultyofAccountancy,UniversitiTeknologiMara,ShahAlam,Selangor40450,Malaysiae-mail:rashidameer@salam.uitm.edu.myJEconFinan1IntroductionMostoftheemergingmarketsinAsiaandSouthAmericahadalegacyoffinancial1marketscontrol.