Ahmed Ahsan

Date of Award

1-1-2023

Thesis Type

phd

Document Type

Thesis

Divisions

FacultyofBusinessandAccountancy

Department

Department of Finance

Institution

Universiti Malaya

Abstract

This thesis investigates the impact of financial integration on the capital structure of the firms operating in 22 emerging countries listed in the MSCI Index. The main objective of this study is to determine the level of integration that has the strongest influence on the financing decisions of the firms and their maturity. For this purpose, we examine a large sample of unbalanced data of firm-level and country-level integrating variables for 9563 firms over the period of twenty-six years i.e. 1990 – 2015. The study also uses some institutional factors like the law and level of corruption that affects the integration level of the country and hinder firm financing decisions. The results of the fixed effect indicate that firms involved in foreign sales (Internationalization) can secure more loans in emerging markets. For country-level integration, we find that credit market integration is positively related to firms' leverage with short maturity while equity market integration is negatively related. The positive relation of leverage with credit markets suggests that the firms take benefit from cheaper loan options that are not available in their own country. However, the effect of equity market integration is more pronounced on the firm’s capital structure and its debt maturity as it serves as the cheapest source. The results also suggest that countries that follow Common laws and have a lower level of corruption are more integrated as the firms in these countries can secure more loans with long maturities. The results provide valuable implications on financial integration to the policymakers and capital structure decision-making for managers in emerging markets.

Note

Thesis (PhD) – Faculty of Business and Economics, Universiti Malaya, 2023.

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