Financial crisis effect on Latin American companies’ debts

Abstract

Purpose: This study aims to verify changes in the debt structure of companies in the main Latin American countries. Approach/Methodology/Design: A difference-in-differences test is applied in a sample of 520 publicly-traded and closed companies, whose data are collected in the previous (2003-2007) and subsequent (2008-2012) periods of the crisis. Findings: The results include the replacement of bank debts by private and public non-bank debts, reduction of maturity of debts and relevance of better level of governance or regulatory environment of countries in guaranteeing the rights of creditors in this process. Practical Implications: These results are in line with the countercyclical fiscal policy adopted by these countries, guaranteeing them greater credibility in international markets. Social Implications: This study also suggest questions for future research. Each Latin American country faces many problems that are motivated by diverse events - political, for example - that impact the economy. That task involves the broadening of this methodology to incorporate internal shocks as well as global crisis. Originality/Value: One of the principal contributions of this study is the finding that companies in the main Latin American countries replace their banking credit by utilizing non-banks, just as done by the developed countries. Understanding better this effect of the global financial crisis may lead to helpful permanent macroeconomic and microeconomic measures.