Regional Disparities and Investment-Cash Flow Sensitivity: Evidence from Chinese Listed Firms

In China, regional disparities are important. We examine the difference in the sensitivity of investment to cash flow between firms in inland regions and those in coastal regions. By using the financial data of Chinese listed firms, we found that firms in inland regions rely more on their internal funds in terms of their investment activities than those in coastal regions and that the sensitivity gap between inland and coastal firms widened in the recent contractionary monetary policy period. This suggests that firms in inland regions are harder to obtain outside funds due to unfavorable social and economic environments for inland firms. Our findings suggest that capital markets in China respond rationally to the potential impact of regional disparities on a firm’s performance

Determinantes Nacionais e Setoriais da Estrutura de Capital na América Latina

This study identified the role of the national environment (the Macroeconomy, Financial Development and Institutional Quality) and industry characteristics (Munificence, Dynamism, Concentration, Life Cycle, Technological Efficiency Dispersion, Product Quality Dispersion, Customer Bargaining Power and Supplier Bargaining Power) on debt of 612 listed companies from 7 Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela). For comparison purposes, the analysis is also extended to 847 U.S. companies. The period of study is 1996-2009 and the analysis employed a Hierarchical Linear Model, which controls the effects according to the level of the variables (country, industry, time and firm). The results suggest that Financial Development eases access to external funds and Institutional Quality is negatively related to firm Leverage. The research also finds evidence that institutional quality can promote asymmetrical development between stock markets and credit markets

Determinants of Corporate Exchange Rate Exposure and Implications for Investors: Evidence from Chilean Firms

This paper investigates the impact of exchange rate fluctuations on the value of nonfinancial firms in Chile. Using a detailed dataset on firms' foreign activities, the potential determinants of the identified exposure are examined. Foreign exchange exposure depends on the levels of foreign currency debt and foreign currency assets. Levels of tradeables (exports and imports) do not explain exposure. Chilean firms attempt real hedges through matching foreign assets and income with foreign debt. Also firms use debt and liquidity to reduce exposure in addition to any possible derivative usage. Other firm characteristics which proxy for corporate hedging are not significant. Further, using a portfolio approach, it is demonstrated that for an investor holding exposed firms, exchange rate variations yield economically significant returns during periods of currency depreciation and appreciation

The Nontradable Share Reform in the Chinese Stock Market

Nontradable shares (NTS) are an unparalleled feature of the ownership structure of Chinese listed companies and represented a major hurdle to domestic financial market development. After some failed attempts, in 2005 the Chinese authorities have launched a structural reform program aiming at eliminating NTS. In this paper, we evaluate the stock price effects of the actual implementation of this reform in 368 firms. The NTS reform generated a statistically significant 8 percent positive abnormal return over the event window, adjusting prices for the compensation requested by tradable shareholders. Results are consistent with the expectation of improved economic fundamentals such as better corporate governance and enhanced liquidity