Oil price collapse and firm leverage in resource-dependent countries

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Title: Oil price collapse and firm leverage in resource-dependent countries
Author: Kurronen, Sanna
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 10/2018
Year of publication: 2018
Publication date: 26.4.2018
Pages: 32
Subject (yso): hinnat; volatiliteetti; öljy; yritykset; rahoitus; luotot; raaka-aineet; luonnonvarat
Keywords: Bofit-kokoelma; raaka-ainekirous; rahoitusrakenne
JEL: Q32; O13; G32; Q02; G21
Other keywords: resources and development; resource rich; capital structure; commodity prices; panel data
Abstract: This study examines the financial channel between oil price volatility and the resource curse using firm-level data. A collapse in oil prices adversely affects firm borrowing in resource-dependent countries. However, unlike in non-resource-dependent countries where just the resource sector is harmed, both resource and non-resource firms are affected in resource-dependent countries in an oil price collapse. We also find evidence of a flight to quality in lending, implying that the decline in leverage can partly be attributed to a reduction in the credit supply. Our results suggest that oil price volatility operates via the financial channel to impede economic diversification in resource-dependent countries.
Rights: https://helda.helsinki.fi/bof/copyright

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