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Analysis of Corporate Debt in Emerging Market Economies

  • Corporate debt volumes in emerging market economies have been increasing greatly post 2007-2008 financial crisis. Debt levels have increased across the globe however, the pace is faster in emerging markets than in advance markets. Major countries in emerging economies such as Brazil, Russian Federation, India and China (BRIC) have a large and concentrated share in growing corporate debts. Although, both company specific factors and macro level factors have impacted the corporate borrowings leading to depressed corporate earnings, financial strains and capital outflows in emerging markets the impact of company specific factors is highly pertinent and demands research. The rise in debt levels has affected the return on earnings (ROEs) of the corporate companies which in turn is adversely impacting emerging economy and its financial stability. This paper has empirically tested for the explaining effects of rising corporate debts and changing return on assets (ROAs) on ROEs of emerging market corporate by establishing a multiple regression model. A sample of 100 corporate companies from BRIC countries has been taken to test the model. The test results confirm the importance of corporate debts in predicting ROEs and possible financial strains. Finally, the regression model has been used to estimate ROEs of these corporate companies for the next 5 years with specific recommendation and policy implication to avoid financial crisis.

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Author:Arage Ali
Referee:Hack Uwe
Document Type:Master's Thesis
Year of Completion:2019
Granting Institution:Hochschule Furtwangen
Date of final exam:2019/08/31
Release Date:2019/08/19
Tag:Corporate debt; Credit rating; Debt trap; Emerging market economics; Financial stability; Gross domestic product (GDP); Interest rates; Return on equity (ROE)
Degree Program:MBA - International Business Management
Functional area:Business Strategy
Licence (German):License LogoUrheberrechtlich gesch├╝tzt