Endogenous corporate leverage response to a safer macro environment: The case of foreign exchange reserve accumulation

• 成果类型: Article
• 署名作者: Tong, Hui; Wei, Shang-Jin
• 署名单位: International Monetary Fund; Columbia University; National Bureau of Economic Research; Center for Economic & Policy Research (CEPR)
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2021.103499
• 发表日期: 2021
• 关键词: Foreign exchange reserves; leverage; Uncertainty sensitivity; Commodity exports

摘要

A country may adopt policy measures such as raising its foreign exchange reserves to better prepare for sudden reversal of international capital flows or currency attacks, which in principle should reduce financial vulnerability for its firms and the entire economy, but the beneficial effect of such policies may be partially offset by endogenous firms' decisions to take on more risks. We present a robust but previously undocumented relationship between corporate leverage and country-level foreign exchange reserve holdings. For 6610 non-financial firms in 23 emerging markets from 2000 to 2006, we show that more foreign reserve accumulation leads to higher corporate leverage. The effect is significantly greater in sectors that are intrinsically more sensitive to uncertainty. We go from correlation to causality via a two-prong instrumental variable strategy: simultaneously (1) instrumenting FX reserves by global commodity price movement, and (2) examining leverage of firms outside the commodity -sensitive sectors. (c) 2021 International Monetary Fund. Published by Elsevier B.V. All rights reserved.