nach oben

Empirical Economics

Erschienen in:

31.05.2018

Balance sheet and currency mismatch: evidence for Peruvian firms

Erschienen in: Empirical Economics | Ausgabe 2/2019

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

In the Peruvian economy, as in other emerging economies, a significant portion of the debt held by firms is denominated in US dollars. While an exchange rate depreciation is likely to increase firm debt and influence investment and production plans, the literature finds weak or no evidence of this balance sheet effect. In this paper, I argue that this effect is observed in firms with a significant currency mismatch. I estimate the currency mismatch (defined as assets minus liabilities in US dollars and expressed as a percentage of total assets in domestic currency) from which the exchange rate has negative effects on firms’ investment. Using financial information from 74 non-financial Peruvian firms from 2002 to 2014, I find significant balance sheet effects for firms with a currency mismatch below − 10.4%.

Vorheriger Artikel Time-varying contemporaneous spillovers during the European Debt Crisis

Nächster Artikel Consumption and credit constraints: a model and evidence from Ireland

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Cowan et al. (2005) in a linear model include controls for the currency composition of assets and net derivative positions of Chilean corporations between 1994 and 2001. They found, once the currency composition of assets and income is accounted for, a significant negative balance sheet effect of US dollar-denominated debt.

It is important to notice that I consider a balanced data since it is required for estimation method.

Threshold parameter estimation is based on the specification with the full set of control variables; specifications with different set of control variables give pretty similar results.

It is worth mentioning that the results are robust if the following are factored in: total debt instead of leverage, US dollar interest rate instead of domestic interest rate, and different combinations of control variables.

The significant effects are at the 5% significance level.

Aghion P, Bacchetta P, Banerjee A (2001) Currency crises and monetary policy in an economy with credit constraints. Eur Econ Rev 45(7):1121–1150CrossRef

Aivazian VA, Ge Y, Qiu J (2005) The impact of leverage on firm investment: Canadian evidence. J Corp Finance 11(1–2):277–291CrossRef

Azabache P (2010) Decisiones de inversión en empresas con dolarización financiera: un modelo umbral del efecto hoja de balance. Consorcio de Investigación Económica y Social, Lima

Baltagi BH, Kao C (2000) Nonstacionary paneles, cointegration in paneles and dynamic panels: a survey. In: Baltagi BH, Fomby BT, Hill RC (eds) Nonstationary panels, panel cointegration, and dynamic panels. Advances in Econometrics 15. Emerald Group Publishing Limited, Bingley, pp 7–51CrossRef

Batini N, Levine P, Pearlman J (2007) Optimal exchange rate stabilization in a dollarized economy with inflation targets. Mimeo, London Metropolitan University, London

Beck T, Demirguc-Kunt A, Laeven L, Levine R (2008) Finance, firm size, and growth. J Money Credit Bank 40(7):1379–1405CrossRef

Berg A, Borensztein E (2000) The pros and cons of full dollarization. IMF Working Papers 00/50

Bernanke B, Gertler M, Gilchrist S (1999) The Financial accelerator in a quantitative business cycle framework. In: Taylor M, Woodford M (eds) Handbook of macroeconomics 1, part C. Elsevier, North-Holland, pp 1341–1393CrossRef

Bleakley H, Cowan K (2008) Corporate dollar debt and depreciations: much ado about nothing? Rev Econ Stat 90(4):612–626CrossRef

Burstein A, Eichenbaum M, Rebelo S (2005) Large devaluations and the real exchange rate. J Polit Econ 113(4):742–784CrossRef

Carranza L, Cayo JM, Galdon-Sanchez JE (2003) Exchange rate volatility and economic performance in Peru: a firm level analysis. Emerg Mark Rev 4(4):472–496CrossRef

Carranza L, Galdon-Sanchez JE, Gomez-Biscarri J (2009) Exchange rate and inflation dynamics in dollarized economies. J Dev Econ 89(1):98–108CrossRef

Carranza L, Galdon-Sanchez JE, Gomez-Biscarri J (2011) The relationship between investment and large exchange rate depreciations in dollarized economies. J Int Money Finance 30(7):1265–1279CrossRef

Carrera C (2016) Identifying the exchange-rate balance sheet effect over firms. Working Paper 67, Peruvian Economic Association

Chan KS (1993) Consistency and limiting distribution of the least squares estimator of a threshold autoregressive model. Ann Stat 21(1):520–533CrossRef

Cespedes L, Chang R, Velasco A (2004) Balance-sheet and exchange rate policy. Am Econ Rev 94(4):1183–1193CrossRef

Choi WG, Cook D (2004) Liability dollarization and the bank balance sheet channel. J Int Econ 64(2):247–275CrossRef

Cowan K, Hansen E, Herrera LO (2005) Currency mismatches, balance sheet effects and hedging in Chilean non-financial corporations. Inter-American Development Bank working paper, p 521

Financial Stability Report (2015) Financial stability report November 2015. Central Bank of Peru

Fazzari SM, Hubbard RG, Petersen BC (1988) Financing constraints and corporate investment. Brook Pap Econ Act 1:141–206CrossRef

Fazzari SM, Petersen BC (1993) Working capital and fixed investment: new evidence on financing constraints. RAND J Econ 24(3):328–342CrossRef

Gala VD, Julio B (2016) Firm size and corporate investment. University of Pennsylvania, Mimeo, Wharton School, New York

Galindo A, Panizza U, Schiantarelli F (2003) Debt composition and balance sheet effects of currency depreciation: a summary of the micro evidence. Emerg Mark Rev 4(4):330–339CrossRef

Grazzi M, Jacoby N, Treibich T (2016) Dynamics of investment and firm performance: comparative evidence from manufacturing industries. Empir Econ 51(1):125–179CrossRef

Hall BH, Kruiniger H (1995) The role of working capital in the investment process. University of California at Berkeley, Mimeo, New York

Hansen BE (1996) Inference when a nuisance parameter is not identified under the null hypothesis. Econometrica 64(2):413–430CrossRef

Hansen BE (1999) Threshold effects in non-dynamic panels: estimation, testing and inference. J Econom 93(2):345–368CrossRef

Hansen BE (2000) Sample splitting and threshold estimation. Econometrica 68(3):575–603CrossRef

Harberger AC (1950) Currency depreciation, income and the balance of trade. J Polit Econ 58(1):47–60CrossRef

Hsiao C, Pesaran M, Tahmiscioglu K (2002) Maximum likelihood estimation of fixed effects dynamic panel data models covering short time periods. J Econom 109(1):107–150CrossRef

Ize A, Levy-Yeyati E (2006) Financial de-dollarization: is it for real? In: Armas A, Ize A, Levy-Yeyati E (eds) Financial dollarization. Palgrave Macmillan, London, pp 38–60CrossRef

Jensen M (1986) Agency costs of free cash flow, corporate finance, and takeovers. Am Econ Rev 76(2):323–329

Kadapakkam PR, Kumar PC, Riddick L (1998) The impact of cash flows and firm size on investment: the international evidence. J Bank Finance 22(3):293–320CrossRef

Kaplan S, Zingales L (1997) Do investment cash flow sensitivities provide useful measures of financing constraints? Q J Econ 112(1):169–215CrossRef

Krugman P (1999) Balance sheet, the transfer problem, and financial crises. Int Tax Public Finance 6(4):459–472CrossRef

Kurshev A, Strebulaev IA (2015) Firm size and capital structure. Q J Finance 5(3):1–46CrossRef

Lang L, Ofekb E, Stulz RM (1996) Leverage, investment, and firm growth. J Financ Econ 40(1):3–29CrossRef

Laursen S, Metzler LA (1950) Flexible exchange rates and the theory of employment. Rev Econ Stat 32(4):281–299CrossRef

Leiderman L, Maino R, Parrado E (2006) Inflation targeting in dollarized economies. In: Armas A, Ize A, Levy-Yeyati E (eds) Financial dollarization. Palgrave Macmillan, London, pp 99–114CrossRef

Lewellen J, Lewellen K (2016) Investment and cash flow: new evidence. J Financ Quant Anal 51(4):1135–1164CrossRef

Loveday J, Molina O, Rivas-Llosa R (2004) Mecanismos de transmisión de la política monetaria y el impacto de una devaluación en el nivel de las firmas. Rev Estud Econ 12:53–136

Luengnaruemitchai P (2003) The Asian crisis and the mystery of the missing balance sheet effect. Mimeo, University of California, Berkeley

Magud N (2010) Currency mismatch, openness and exchange rate regime choice. J Macroecon 32(1):68–89CrossRef

Orrego F, Gondo R (2016) Dedollarization and financial robustness. In: Yamada G, Winkelried D (eds) Política y estabilidad monetaria en el Perú. Universidad del Pacífico press, Lima, pp 177–208

Whited T (1992) Debt, liquidity constraints, and corporate investment: evidence from panel data. J Finance 47(4):1425–1460CrossRef

Titel: Balance sheet and currency mismatch: evidence for Peruvian firms
Publikationsdatum: 31.05.2018
Erschienen in: Empirical Economics / Ausgabe 2/2019
Print ISSN: 0377-7332
Elektronische ISSN: 1435-8921
DOI: https://doi.org/10.1007/s00181-018-1459-y

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft"

Springer Professional "Wirtschaft+Technik"

Weitere Artikel der Ausgabe 2/2019

Consumption and credit constraints: a model and evidence from Ireland

Social relationships, public media, and pro-environmental behaviors

Volatility-dependent correlations: further evidence of when, where and how

Moderating effect of inflation on the finance–growth nexus: insights from West African countries

“Sakura” has not grown in a day: infrastructure investment and economic growth in Japan under different tax regimes

Assessing the cross-country interaction of financial cycles: evidence from a multivariate spectral analysis of the USA and the UK