The East Asian crisis and financing corporate investment

is there a cause for concern?

Nigel Driffield, Sarmistha Pal

Research output: Contribution to journalArticle

Abstract

In view of limited empirical evidence concerning the microeconomic aspects of corporate financial problems in the East Asian countries in the 1990s, this paper analyses the financing pattern of corporate investment in Indonesia, Korea, Malaysia, and Thailand. The analysis is based on an unbalanced panel of listed firms during the period 1989–1997. By using firm size, retention practices, and leverage as three different indicators of financial constraint on firm investment, we have examined the role of various internal and external financing variables on corporate investment in the sample countries. Results indicate that a large number of sample firms depend on free cash flow, especially in Indonesia; there was also a steady increase in debt-equity ratio in all countries. There were signs of agency costs in the use of cash flow in Korea and Malaysia and also in the use of debt financing in Malaysia and Thailand. There was also sign of over-investment among the Thai firms during 1994–1997 though it appears very little if at all was done to redress it in time.
Original languageEnglish
Pages (from-to)507-527
Number of pages21
JournalJournal of Asian Economics
Volume12
Issue number4
DOIs
Publication statusPublished - 2001

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Financing
East Asian crisis
Corporate investment
Malaysia
Thailand
Korea
Indonesia
Overinvestment
External financing
Debt financing
Agency costs
Firm size
Cash flow
Microeconomics
Asian countries
Debt
Leverage
Free cash flow
Equity
Firm investment

Keywords

  • corporate investment
  • firm size
  • retention ratio
  • leverage
  • overinvestment
  • agency costs

Cite this

Driffield, Nigel ; Pal, Sarmistha. / The East Asian crisis and financing corporate investment : is there a cause for concern?. In: Journal of Asian Economics. 2001 ; Vol. 12, No. 4. pp. 507-527.
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The East Asian crisis and financing corporate investment : is there a cause for concern? / Driffield, Nigel; Pal, Sarmistha.

In: Journal of Asian Economics, Vol. 12, No. 4, 2001, p. 507-527.

Research output: Contribution to journalArticle

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