Debt Or Equity?: How Firms in Developing Countries Choose, Part 63
IFC Discussion Paper No. 22.Corporate finance in emerging market countries is changing dramatically as the recent liberalizations revitalize stagnant domestic capital markets and permit increased access to overseas markets. With this trend evident in many countries, corporations are re- examining their financial structures and finding more financial instruments to choose from.This paper discusses these new developments and examines the traditional features of emerging-market corporate finance. It presents a simple framework for the debt-equity choice based on considerations of cost, risk, control, and disclosure. The impact of these considerations on government control is also illustrated with examples from several emerging market countries.
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Financial Instruments Cost Risk and Control
Capital Markets and Corporate Finance
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Argentina bank loans borrowing Brazil capital structure capital structure decisions Chilean conversion price convertible bonds corporate bonds corporate debentures corporate debt Corporate Debt Markets corporate finance cost of capital cost of debt cost of equity debt and equity debt issues debt-equity depository receipts developing country firms disclosure dividend yield dollar domestic capital markets domestic market earnings economic emerging market firms equity capital equity issues equity market Eurobond Euroconvertible bonds exchange existing shareholders existing shares Figure financial instruments financing decisions firm's foreign GDRs Global Depository Receipt growth important India institutional investors international debt international investors international markets investment banks issuance costs issuers issues of equity leverage limited long-term market capitalization market price maturities million offshore P.O. Box pension funds percent price increases primary market private sector put options ratios real interest rates restrictions risk riskiness role share price sources stock market substantially traded Venezuela