Do firms accumulate cash to engage in carry trade evidence for LATAM
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Recent evidence has pointed out the existence of an after crisis global liquidity in which bond issuances of non-financial corporations has kept growing. This evidence also suggests that firms take advantage of cheaper external debt conditions and increase their cash or liquid assets when the conditions for pursuing carry trade activities are more attractive. However, we propose that the carry trade story is too narrow and hypothesize that increment in cash holdings may stem from firm's investing strategies. Namely, firms raise cheaper debt to take advantage of favorable external conditions in order to realize investment in later periods. Using firm-level information for six Latin American countries, we find evidence that suggest that firms use hard currency issuances in order to finance future investment. This result is robust and heterogeneous. We include other country-specific variables, as the presence of capital controls, and check the robustness of our findings; the main results hold.
Seminario para optar al título de Ingeniero Comercial, Mención Economía
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