The Impact of the Global Financial Crisis on Firms' Capital Structure

A.Demirguc-Kunt, M. Soledad Martinez-Peria, T. Tressel | The World Bank

Using a data set covering about 277,000 firms across 79 countries over the period 2004–11, this paper examines the evolution of firms’ capital structure during the global finan cial crisis and its aftermath in 2010–11. The study finds that firm leverage and debt maturity declined in advanced economies and developing countries, even in countries that did not experience a crisis. The deleveraging and maturity reduction were particularly significant for privately held firms, including small and medium enterprises. For small and medium-size enterprises, these effects were larger in countries with less efficient legal systems, weaker information-sharing mechanisms, shallower banking systems, and more restrictions on bank entry. In contrast, there is weaker evidence of a significant decline of leverage and debt maturity among firms listed on a stock exchange, which are typically much larger than other firms and likely benefit from the “spare tire” of easier access to capital market financing.

Financial Crisis, Banking
Year of publication:
File size:
1061114 bytes