재무연구 제 권 호 (2016년 5월)
Asian Review of Financial Research, Vol., No..
pp.276~316
pp.276~316
The Determinants of Foreign Currency Debt Financing : Evidence from Korea
Sung C. Bae Professor at the Department of Finance, College of Business Administration, Bowling Green State University in Bowling Green, OH, USA
Hyeon Sook Kim a doctoral student at the School of Business, Chungnam National University, Daejon, Korea and a Researcher at Public Procurement Service, Government Complex, Daejon, Korea
Taek Ho Kwon Professor at the School of Business, Chungnam National University in Daejon, Korea
We investigate the determinants of firms’ usage of foreign currency (FC) debt financing, relative to local currency (LC) debt financing. Employing extensive data of Korean firms during 2002-2012, we find that the firm-level determinants of FC and LC debt financing differ and vary by the period of appreciation or depreciation of LC value. Consistent with the findings in the literature, a firm’s export ratio is significantly related to the usage of FC debt, evidence supporting for the hedging role of FC debt. Undocumented in the literature, however, we provide evidence on the separation of firms favoring FC debt and firms favoring LC debt. The LC debt financing is affected mainly by borrower incentives such as operating profitability, and depreciation expense that reflect borrower’s capital needs. In contrast, the FC debt financing is affected mostly by lender incentives such as tangible asset ratio, firm size, and asset growth, as well as export ratio, which foreign lenders weigh heavily to assess the potential value of collaterals.
Sung C. Bae
Hyeon Sook Kim
Taek Ho Kwon
We investigate the determinants of firms’ usage of foreign currency (FC) debt financing, relative to local currency (LC) debt financing. Employing extensive data of Korean firms during 2002-2012, we find that the firm-level determinants of FC and LC debt financing differ and vary by the period of appreciation or depreciation of LC value. Consistent with the findings in the literature, a firm’s export ratio is significantly related to the usage of FC debt, evidence supporting for the hedging role of FC debt. Undocumented in the literature, however, we provide evidence on the separation of firms favoring FC debt and firms favoring LC debt. The LC debt financing is affected mainly by borrower incentives such as operating profitability, and depreciation expense that reflect borrower’s capital needs. In contrast, the FC debt financing is affected mostly by lender incentives such as tangible asset ratio, firm size, and asset growth, as well as export ratio, which foreign lenders weigh heavily to assess the potential value of collaterals.
