Corporate Dollar Debt and Depreciations: Much Ado About Nothing?
By Hoyt Bleakley, Kevin Cowan. Review of Economics and Statistics, 2005
205 citations recorded by the source corpus.
Emerging markets firms often carry foreign-currency debt on their balance sheets. Following a depreciation, the expanding peso value of dollar liabilities could, via a net-worth effect, offset the expansionary competitiveness effect. To assess which effect dominates, we use accounting data (including the currency composition of liabilities) for 450 nonfinancial firms in five Latin American countries in the 1990s. We find that firms holding more dollar debt do not invest less than their peso-indebted counterparts following a depreciation. We also show that these firms match the currency denomination of their liabilities with the exchange rate sensitivity of their profits.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/2f2fb4dae6bd29958bbbb4dff58489f03c7f5f02
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Citations in the corpus
- Foreign currency debt, financial crises and economic growth: A long-run view (2010, background): “Bleakley and Cowan (2008), in a sample of Latin American countries, found no evidence that firms’ investment decisions are affected by hard currency debt even in the face of depreciation.”