n South African Journal of Economic and Management Sciences - Firm age, collateral value, and access to debt financing in an emerging economy : evidence from South Africa
|Article Title||Firm age, collateral value, and access to debt financing in an emerging economy : evidence from South Africa|
|© Publisher:||University of Pretoria|
|Journal||South African Journal of Economic and Management Sciences|
|Affiliations||1 Rhodes University and 2 Rhodes University|
|Publication Date||Jan 2012|
|Pages||55 - 71|
|Keyword(s)||Collateral, D22, Debt financing, Firm age, G30, Leverage and South Africa|
ISI Social Science
This paper applies the Blundell and Bond system generalised method of moments (GMM) two-step estimator to examine the impact of age and collateral value on debt financing, using a panel of 177 non-financial companies listed on the Johannesburg Stock Exchange over the period 1999 to 2009. The results show that South African firms have target leverage ratios and adjust their capital structures from time to time to achieve their respective targets, that the relationship between firm age and debt financing is non-monotonic, and that firms with higher collateral value are likely to face fewer constraints on borrowing and therefore have greater access to medium-term and long-term debts. Robustness tests also reveal that during start-up and maturity stages, a firm's access to debt markets is significantly influenced by investments in assets that are acceptable to external creditors as collateral. These findings suggest that debt financing policies could be more critical for firms in the start-up and maturity stages.
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