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- Title
Implications of Government Borrowing for Corporate Financing in Emerging Economies: A Crowding Out Kuznets Curve.
- Authors
Nasir, Muhammad Ali; Huynh, Toan Luu Duc; Do, Quynh Thi Nhu; Nguyen, Cuc Thi; Tran, Quynh Thi
- Abstract
This paper investigates the implications of government borrowing for corporate financing and capital structure of the firms. In doing so, we explore the effects of government debt, macroeconomic and firm-specific factors on firm's choice of financing and capital structure. We draw on the 10-year data (2007–2017) of 225 non-financial firms listed on the Ho Chi Minh Stock Exchange (HoSE) and employ the system Generalized Method of Moments (system-GMM) for estimation. Our key findings suggest that the government borrowing and debt financing for the Vietnamese listed companies have a negative relationship. Specifically, the short-term corporate leverage structure is influenced more strongly than the long-term leverage structure. We also define the threshold for the association between government borrowing and corporate financing decisions by capturing a U-shaped relationship i.e., Crowding out Kuznets Curve (CKC). Furthermore, macroeconomic factors also show a statistically significant impact on corporate financing decisions. Our findings have profound implications for the fiscal and public policymakers, investors as well as corporate finance managers and firms.
- Subjects
HO Chi Minh, 1890-1969; CORPORATE finance; KUZNETS curve; CAPITAL financing; CAPITAL structure; CROWDS
- Publication
Review of Pacific Basin Financial Markets & Policies, 2020, Vol 23, Issue 2, pN.PAG
- ISSN
0219-0915
- Publication type
Article
- DOI
10.1142/S0219091520500174