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"Zervos documents the precise costs of debt and equity issuance, both domestically and internationally, for firms in Brazil, Chile, and Mexico. Costs include investment banking and legal fees, regulatory and exchange listing costs, rating agency fees, and expenditures for marketing and publishing. Her findings suggest that Brazilian firms face similar costs in issuing debt locally or abroad, whereas domestic equity issuance is nearly twice as expensive as debt. While the Chilean domestic corporate debt market is well developed by emerging market standards (size of the market and maturity of issues), Chilean firms can issue debt more cheaply internationally than at home. In addition, while equity financing is cheaper in Chile from a transaction cost perspective, over the past decade most firms have used bonds rather than shares to raise capital. This financing trend is true in all three countries. Finally, Mexican firms can issue debt at the lowest costs of the three, but face the highest equity issuing costs. In addition to documenting these features, the author sheds light on how the investor base in these countries plays a strong role in influencing the ability of firms to access domestic capital markets. This paper 'a product of the Financial Sector Operations and Policy Department' is part of a larger effort in the department to understand and promote private sector financing in emerging markets"--World Bank web site.

Corporate debt --- Corporate debt --- Corporate debt

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Corporate debt

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Recent capital structure theories have emphasized the role of debt in minimizing the agency costs that arise from the separation between ownership and control. In this paper we argue that capital structure choices themselves are affected by the same agency problem. We show that, in general, the shareholders' and the manager's capital structure choices differ not only in their levels, but also in their sensitivities to the cost of financial distress and taxes. We argue that only the managerial perspective can explain why firms are generally reluctant to issue equity, why they issue it only following a stock price run-up, and why Corporate America recently deleveraged under the same tax system that supposedly generated the increase in leverage in the 1980s.

Corporate debt.

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Corporate debt

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This paper documents trends in the sources and uses of funds, market valuations, and rates of return for a sample of U.S. manufacturing firms during the half -century ending in 1977. The major objective of the paper is to construct economic balance sheet relationships based on securities market valuations rather than on the more familiar book values used for accounting purposes. Among the more interesting long-term trends highlighted in the analysis is the finding that the widely recognized increase in debt in manufacturing firms' capitalization has come primarily at the expense of .preferred stock. A second interesting point is the contrast between the sharp fall in common equity values in 1929-32, which was entirely reversed by 1936, and the even sharper post-1968 decline which was not reversed by 1977 nor, for that matter, by 1981. This paper is an introduction to a more comprehensive study which will be part of the second stage of the Debt/Equity Research Project.

Corporate debt.