Foreign currency borrowing by small firms in the transition economies
Journal
Journal of Financial Intermediation
ISSN
1042-9573
ISSN-Digital
1096-0473
Type
journal article
Date Issued
2011-07
Author(s)
Abstract
We examine the firm- and country-level determinants of foreign currency borrowing by small firms, using information on the most recent loan extended to 3101 firms in 25 transition countries between 2002 and 2005. Our results suggest that foreign currency borrowing is much stronger related to firm-level foreign currency revenues than it is to country-level interest rate differentials. Supporting the conclusion that carry-trade behavior is not the key driver of foreign currency borrowing in our sample we find no evidence that firm-level indicators of distress costs or financial transparency affect loan currency denomination. Overall, our findings suggest that retail clients which do take foreign currency loans are better equipped to bear the corresponding currency risks than is commonly thought. Policy makers should therefore take a closer look at the characteristics of borrowers before implementing regulations which are aimed at curbing foreign currency loans.
Language
English
Keywords
Foreign currency borrowing
Competition
Banking sector
Market structure
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Volume
20
Number
3
Start page
285
End page
302
Pages
18
Subject(s)
Eprints ID
76305