Financial constraints, institutions, and foreign ownership

Alquist, Ron; Berman, Nicolas; Mukherjee, Rahul; Tesar, Linda L.

doi:10.1016/j.jinteco.2019.01.008

Cited by 39 publications

(26 citation statements)

References 64 publications

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“…Regarding this measurement issue, we recommend for advance reading an overview by [21] on the literature related to measuring financial constraints. One stream of literature uses the data of financial statements and identifies the financial constraints indirectly-by means of sensitivity of investment costs to diverse factors [4,5,7,11].…”

Section: Literature Overview and Hypotheses Developmentmentioning

confidence: 99%

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Perception and Drivers of Financial Constraints for the Sustainable Development

et al. 2020

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Financial market imperfections constrain firms’ ability to obtain funds. This is especially true for the former communist bloc countries. However, the restrictions on access to financing and the attitudes of management in these geographies remain overlooked by academic research and represent an important obstacle on the roadmap to sustainable development. The objective of this paper is to fill this gap by analyzing the impact of ownership structure, institutional environment development, and debt market profile on the perception of financial constraints by the representatives of corporate top management from 28 countries of the former communist bloc. Our analysis spans over the period 2002–2013. We apply the probit and Heckman models to investigate nonlinear and multicast effects of the considered factors. We evidence that during the crisis and post-crisis periods, foreign ownership alleviates the restrictions on access to financial resources. We also discuss the role of state ownership. We find that the volume of local currency bond market has a nonlinear U-shape relationship. Our results are useful for policy makers focused on sustainable development of the former communist economies by means of improving access of businesses to financing.

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Section: Literature Overview and Hypotheses Developmentmentioning

confidence: 99%

“…Ref. [21] presented an overview on the literature related to measuring financial constraints. We consider an original binary variable, which describes the obstacle to finance obtained from company surveys.…”

Section: Model Specificationmentioning

confidence: 99%

Perception and Drivers of Financial Constraints for the Sustainable Development

et al. 2020

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“…Firstly, this study offers a new concept of reversal causality of stock performance-risk and macroeconomic factors on foreign ownership that is useful for future research agenda on testing causality on this topic (Kim et al, 2019;Qin and Bai, 2014). Secondly, this paper by studying the ASEAN with different market conditions (developing vs developed countries), sub-samples (crisis vs non-crisis), and proxies, offers policy makers a guide towards rethinking policies regarding the regulation of foreign investment given the importance of foreign investors as in our findings (Aebi et al, 2012;Alquist et al, 2019).…”

Section: Introductionmentioning

confidence: 75%

“…In total, we use five proxies for market performance (namely, ROA, ROE, PER, Tobin's Q, and EPS) for Perf i,t , and therefore, we estimate Equations ( 1) and ( 2) five times, one model for each of the five proxies of stock performance. Additionally, we include five stock-level, namely market capitalization (Size), leverage (Lev), TurnOver (TO), the Price-to-Book Value (PBV), age of a stock (Age) of stock i at time t and three macroeconomic control variables, namely, the Exchange Rate (ER), Interest Rate (IR), and an annual growth rate of GDP of country j at time t. The choice of control variables is dictated by prior studies (see for instance, (Alquist et al, 2019;Chen et al, 2013;Li et al, 2011;Naufa et al, 2019;Peranginangin et al, 2016;Vo, 2016;Xie et al, 2019)).…”

Section: B Methodologymentioning

confidence: 99%

Foreign Ownership, Stock Performance-Risk, and Macroeconomic Factors in Asean Countries

Naufa

Hanafi

Lantara

2021

BEMP

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This research examines the impact of foreign ownership on stock performance-risk and macroeconomic factors in countries of the Association of Southeast Asian Nations (ASEAN). To examine our research question, we utilize annual panel data consisting of listed companies (2007 to 2018). We find that foreign ownership enhances stock performance and gross domestic product, but it decreases risk, exchange, and interest rate. Conversely, performance and GDP attract foreign investors, but risk, exchange, and interest rates reduce it. Those results differ in diverse settings and countries.

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“…Fredriksson and Svensson (2003) and Svensson (2000)) in the economics literature and have been shown to be highly correlated with the corruption perception index. Some studies, such as Alquist et al (2019) provide sensitivity to various measures and find the results are robust to changing the index.…”

Section: Empirical Findingsmentioning

confidence: 99%

The Bribe Rate and Long Run Differences in Sovereign Borrowing Costs

Cotoc

Johri

2021

SSRN Journal

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The average cost of borrowing on international financial markets varies widely from nation to nation even after controlling for the varying levels of indebtedness of their governments. This suggests that markets assign country specific default risk assessments. In this paper we focus on one natural source of this difference -the quality of their institutions. We begin by showing that the average sovereign spread is positively related to the average percentage of a government contract that must be given as a "gift" in order to secure the contract. We then build a sovereign default model where the government is constrained to use corrupt bureaucrats to deliver public goods and services and manage its accounts. Using the gift data as a measure of the public resources diverted by bureaucrats, and the Rule of Law index as a measure of institutional quality, we estimate the diversion policy of bureaucrats and use it to calibrate our model to international data. We use the model to generate an artificial international data set where countries vary only in the institutional quality parameter. Running the same regressions on our artificial data, we find that average spreads are positively associated with the bribe (gift) rate and with average debt levels. The model implies that when revenue streams are low, a benefit of default is that public services net of bureaucratic diversion actually increase. Since the net gain in public services obtained by defaulting is decreasing in the level of institutional quality, international lenders assign lower default risk to those countries.

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Financial constraints, institutions, and foreign ownership

Cited by 39 publications

References 64 publications

Perception and Drivers of Financial Constraints for the Sustainable Development

Perception and Drivers of Financial Constraints for the Sustainable Development

Foreign Ownership, Stock Performance-Risk, and Macroeconomic Factors in Asean Countries

The Bribe Rate and Long Run Differences in Sovereign Borrowing Costs

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