Theses and Dissertations from UMD
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New submissions to the thesis/dissertation collections are added automatically as they are received from the Graduate School. Currently, the Graduate School deposits all theses and dissertations from a given semester after the official graduation date. This means that there may be up to a 4 month delay in the appearance of a give thesis/dissertation in DRUM
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Item Capital Inflows, Financial Development, and Credit Constraints at the Firm Level: Theory and Evidence(2012) Armenta Reales, Armando Jose; Vegh, Carlos; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation is composed of two related essays on the effects of periods of large capital inflows on macroeconomic aggregates and financing constraints at the firm level, and the relationship of the differences in these effects among developed and emerging economies with the degree of financial development. In the first essay I conduct an empirical exploration of this topic. I show that periods of large capital inflow are associated with more volatile macroeconomic outcomes in economies with a low degree of financial development, relative to economies with more developed financial systems. Employing firm level data for 42 countries, I show that firms in economies with a low level of financial development exhibit a relatively larger loosening in the cost of borrowing and a larger appreciation in equity prices. I show that financing constraints are more prevalent in firms located in countries with a low degree of financial development. Moreover, periods of capital inflow booms relax these financing constraints. This decrease is significant regardless of the composition of capital inflows, stronger when coupled with domestic credit booms, larger for firms in the non-tradable sector and larger for firms that depend more heavily on internal funds to finance their investment opportunities. In the second essay, using a theoretical model, I explain the larger aggregate response around capital inflow booms, as arising from varying degrees of financial development, and their relation to the pervasiveness of credit constraints at the firm level. I propose a heterogeneous agents model in which the share of borrowing-constrained agents depends on the level of financial development. Agents in an economy characterized by a low degree of financial development can use a lower share of their assets, measured at their market value, as collateral to secure debt. I show that a period of large capital inflow causes an increase in the demand for capital for both unconstrained and constrained firms. At the initial valuation of capital, only unconstrained firms can freely adjust their demand for capital. However, the increase in the aggregate demand for capital increases its valuation and thus generates a loosening in financing constraints for ex-ante constrained firms, and an amplified response at the firm level and on macroeconomic aggregates.Item Foreign Portfolio Investment and the Financial Constraints of Small Firms(2005-05-27) Knill, April Thompson; Maksimovic, Vojislav; Finance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This essay examines the impact of foreign portfolio investment on the financial constraints of small firms. Utilizing a dataset of over 195,000 firm-year observations across 53 countries, I examine the impact of foreign portfolio investment on capital issuance and firm growth across countries and firm characteristics, in particular size. After controlling for firm-, industry- and country-level characteristics such as change in foreign exchange rate, share of market capitalization, relative interest rates and investment climate, I find that foreign portfolio investment helps to bridge the gap between the amounts of financing small firms require and that which they can access through the capital markets. Specifically, I find that foreign portfolio investment is associated with an increased ability to issue publicly traded securities for small firms in all nations, regardless of property rights development. For those small firms that do issue, the form of capital appears to be debt. Since small firms often rely heavily on bank lending, I also test for potential increases in credit for small firms utilizing the bank lending theory of monetary transmission. Results show significantly decreased short-term debt and increased long-term debt, supporting the contention that bank debt maturity to these firms has increased. This transition to longer-term debt could also be as a result of the increased public debt securities these firms are more able to access. The overall increased access to capital only leads to value-enhancing growth at the firm level in nations with more developed property rights. I find that the volatility of foreign portfolio investment is significantly negatively associated with the probability of small firms issuing publicly-traded securities as well as their firm growth, in periods when their domicile nations are deemed less 'creditworthy.' Results underscore the significance of a good financial system that minimizes information asymmetry and enhances liquidity, as well as property rights and country creditworthiness, to instill confidence in foreign investors.